The Reserve Bank of Australia (RBA) delivered its third consecutive 25 basis point rate hike, raising the cash rate target (CRT) to 4.35% while signaling a pause in further tightening for the near term [1]. Societe Generale strategists note that despite this move, the AUD/USD currency pair has pulled back and is currently drifting below 0.7150, after previously reclaiming its 50-day moving average (DMA) in April and staging a strong rebound [1]. The pair has struggled to break above the March peak, forming an interim high near 0.7225, which indicates a lack of sustained upward momentum [1].
The RBA's updated projections now see the CRT reaching 4.7% by December 2026, up from a previous forecast of 4.2% in February, and remaining at 4.7% through 2027 and the first half of 2028 [1]. Core inflation is expected to peak at 3.8% in the second quarter, then decline to 3.1% by year-end, 2.6% in 2027, and 2.5% in the first half of 2028. Headline CPI is projected to fall from 4.0% in December 2026 to 2.4% by mid-2027 [1].
Governor Bullock's comments were described as more neutral, which prompted receiving interest in the front end and a bull steepening in the 2s/10s yield curve [1]. The RBA emphasized its data-dependent approach, with no predetermined path for future rate moves, and highlighted the risk of second-round effects across goods and services [1]. While a pause in June is considered likely, the possibility of another rate hike to 4.6% remains if upside risks to inflation materialize, potentially as soon as August or September [1].
Technically, Societe Generale strategists suggest that a period of consolidation for AUD/USD cannot be ruled out, with defense of the 50-DMA around 0.7060 seen as crucial for any continuation of the uptrend. A break above 0.7225 could signal a larger upward move [1].
CONCLUSION
The RBA's third rate hike and subsequent pause signal have led to a cautious outlook for AUD/USD, with consolidation likely in the near term. Market participants are closely watching inflation data and the RBA's data-dependent stance for cues on future rate moves. The technical outlook suggests key levels to watch are 0.7060 for support and 0.7225 for potential upside breakout.