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TD Securities analyst Prashant Newnaha forecasts the Reserve Bank of Australia (RBA) will increase interest rates by 25 basis points in March and May 2024, reversing 2023's rate cuts and restoring the cash rate to 4.35%. This tightening path reflects the RBA's response to persistent inflation and strong labor market data, signaling a shift from accommodative to neutral monetary policy. The RBA's hawkish stance is expected to bolster the Australian dollar (AUD) against majors like the USD, particularly if inflation remains above target. Market participants are closely monitoring the RBA's policy trajectory for clues on global central bank coordination, especially with the Fed's potential rate cuts later in 2024. Traders should watch upcoming inflation reports and employment data for confirmation of the RBA's tightening timeline, which could influence AUD/USD volatility. For MENA investors, the AUD's strength may impact trade flows and commodity-linked assets, given Australia's role as a key supplier of energy and metals to Gulf nations.
