The Reserve Bank of Australia (RBA) maintained its policy rate at 4.35% in a unanimous decision, according to MUFG’s Michael Wan [1]. Following the policy statement, the AUD/USD currency pair initially dipped but subsequently rebounded after RBA Governor Michele Bullock reiterated concerns about persistent inflation and emphasized that future rate hikes remain possible if inflation does not ease [1].
The RBA expressed caution regarding external risks, specifically noting the potential for larger or more persistent negative effects stemming from the Middle East conflict [1]. Domestically, the central bank highlighted a softer property market, citing weaker wealth effects, rising interest rates, and tighter investment property tax rules as factors supporting its efforts to bring down inflation. Additionally, the RBA revised its consumption forecast downward from 1.9% to 1.6% by year end [1].
MUFG’s global team projects that AUD/USD is likely to move gradually above the 0.70 level, attributing this outlook more to improving risk sentiment, anticipated Federal Reserve rate cuts, and a weaker US Dollar rather than further RBA rate hikes [1].
CONCLUSION
The RBA’s decision to keep rates steady, combined with Governor Bullock’s hawkish tone on inflation, supported a rebound in the Australian Dollar. Market participants and analysts expect gradual gains in AUD/USD, driven primarily by external factors such as US monetary policy and global risk sentiment.