TD Securities anticipates a 25bps hike from the RBA next week, driven by a firmer growth outlook and inflationary pressures. The report by Prashant Newnaha and Alex Loo, highlights that if the RBA raises rates, it may be viewed as an insurance hike, indicating no immediate follow-up hikes. Additionally, the AUD is expected to face pressure if the RBA does not deliver the anticipated hike, although a retracement towards 0.69 could reignite long positions.

RBA likely to hike rates soon

"A likely rise in the RBA's model based estimates of excess demand should see the RBA deliver a 25bps hike next week. A firmer growth outlook, no real signs the labour market is softening, discretionary and services spending accelerating in Q4 and the broadening in the breadth of inflation should be sufficient to draw the RBA to the table to hike."

"If the market concludes the RBA is in no rush to deliver a follow up hike, it's likely the AUD pares recent gains. That said with the surge in commodities prices presents a tailwind to a commodity export-oriented economy such as Australia."

"We believe investors would re-engage AUD longs if the currency retraces towards 0.69 on the belief that the outlook for global growth and equities remains positive."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)