Turning to the AUD/USD pair, Australian private sector credit could provide insights into credit demand and household spending. Economists forecast private sector credit to rise 0.6% month-on-month in July, mirroring June’s upswing.
A larger increase may signal a pickup in consumer spending, potentially fueling inflation. A higher inflation outlook may temper expectations of a Q4 RBA rate cut. Conversely, a softer print may support a more dovish RBA rate path, weighing on the Aussie dollar.
Why do private sector credit trends matter for the RBA?
The RBA considers its monetary policy somewhat restrictive despite August’s rate cut. Restrictive policy typically curbs credit demand and consumption, cooling inflationary pressures. If credit demand and consumption rise, the RBA may hold cash rates steady or even hike rates to counter demand.
When do economists expect the RBA to cut rates again?
AMP Head of Investment Strategy and Chief Economist Shane Oliver remarked on the RBA’s Meeting Minutes, stating:
“RBA minutes reiterated dovish guidance, noting the cash rate is ‘still somewhat restrictive’ & ‘some further reduction in the cash rate over the coming year’ is likely required, with reference to the pace being gradual and data determined. We expect cuts in Nov, Feb & May to 2.85%.”
Private sector credit would have to fall sharply in July to raise bets on a September RBA rate cut.
AUD/USD: Key Scenarios to Watch
Bearish AUD/USD Scenario: Weaker private sector credit or dovish RBA rhetoric. These factors could push AUD/USD toward the 50-day EMA, bringing the 200-day EMA and $0.6450 into play.
Bullish AUD/USD Scenario: Rising private sector credit or hawkish RBA cues. These factors could send AUD/USD toward the $0.6550 resistance level, paving the way toward the $0.66 level.
