DAILY CURRENCY OUTLOOK

• The RBA, FOMC & the ECB all meet this week, so a heavy interest rate decision week could see huge volatility in the FX markets.
• A likely probability of a 25bp hike on Tuesday from the RBA could see the AUD/USD rise towards 67c because markets are pricing no change (surprise to the upside).
• Expecting the FOMC & ECB to be more hawkish than market expectations, supporting the USD to move higher and the Aussie back lower towards 66c.

• US interest rates are to pave this week’s volatility in the FX markets.
• Expecting a more-than-expected hawkish tone from the FOMC, which could see the USD making further gains.
• Inflation is still too high, and the labour market is too tight – hence the hawkish rhetoric.
• Therefore, we could expect a further 25bps rate hike on Thursday to 5%-5.25%, from the FOMC.
• AUD/USD is expected to have a volatile week as well.
• We could see the RBA increase the cash rate by 25bp to 3.85% (Tuesday), although the market is pricing no change.
• Any surprise rate hikes could see the AUD/USD rise, beating market expectations and vice versa, but a rate cut is unlikely at this stage.
• We expect the AUD/USD to likely head back to a key support level of 0.6600 if the FOMC is more hawkish than expected.