One more 25 bps rate hike looks likely from Reserve Bank of Australia

The Australian Dollar remained volatile in the Asian session after the IHS Markit reported weak Caixin Manufacturing PMI data. The economic data has landed at 50.0, lower than the consensus of 51.7 and the former release of 51.5. Being the leading trading partner of China, the Australian Dollar was impacted by a decline in the scale of manufacturing activities in the Chinese economy.

For now, the spotlight has shifted to the interest rate decision by the Reserve Bank of Australia, which will be announced on Tuesday. Reserve Bank of Australia Governor Philip Lowe is expected to hike rates further by 25 basis points (bps) to 3.80%. Australian monthly inflation indicator has softened to 6.8% in February from its peak of 8.4% recorded in December. The presence of evidence conveying a sharp drop in Australian inflation won’t be sufficient to force RBA policymakers to go steady on interest rates.