BBH analysts expect the RBA to hold rates at 4.35% and forecast AUD weakness due to soft data and yield spreads.
Brown Brothers Harriman analysts anticipate the Reserve Bank of Australia will pause its tightening cycle at 4.35% on Tuesday, following three consecutive 25bps hikes since February. The RBA has signaled a data-dependent approach amid weak Q1 GDP, poor labor data, and subdued sentiment, reducing the likelihood of another hike this year.
Market pricing currently implies a 60% chance of one final 25bps increase to 4.60% by year-end. However, sluggish underlying demand and a disappointing April labor report suggest further tightening may be unlikely. The Australia-US 2-year yield spread points to potential downside for AUD/USD, with a near-term target below 0.7000.