The Australian Dollar (AUD) edged higher on Monday, with AUD/USD trading around 0.7130, up 0.06% on the day, as market participants increased bets on another interest rate hike by the Reserve Bank of Australia (RBA) at its upcoming monetary policy meeting next week [1]. The RBA has already raised its Official Cash Rate (OCR) by 75 basis points this year to 4.35%, responding to persistent inflationary pressures that continue to concern policymakers [1].
RBA Governor Michele Bullock reinforced expectations for further tightening during her appearance before the Parliamentary Treasury Committee last week, warning that inflation risks remain tilted to the upside. Bullock stated that the key question is whether the monetary tightening delivered so far will be sufficient to return inflation to target within a reasonable timeframe [1]. Investors are now focused on Bullock's scheduled fireside chat in Sydney on Tuesday, seeking additional clues about the RBA's next move. Additionally, Australian labor market data due on Thursday is seen as a crucial event; further signs of employment resilience could strengthen expectations for tighter monetary policy and provide further support to the AUD [1].
On the US side, the US Dollar remains supported by expectations of further interest rate hikes from the Federal Reserve, as policymakers continue to express concerns about inflation. Minneapolis Fed President Neel Kashkari commented over the weekend that inflation remains too high across the US economy and is not solely driven by higher oil prices, maintaining expectations for restrictive US monetary policy and potentially limiting gains in AUD/USD [1].
Trade relations between the United States and China are also in focus, with US President Donald Trump and Chinese President Xi Jinping scheduled to meet in Washington on Thursday to discuss the tariff truce. Developments in China are particularly important for the Australian Dollar due to the close trade ties between the Australian and Chinese economies [1].
Technically, AUD/USD holds a neutral-to-slightly-bullish tone, trading above the 100-period simple moving average at 0.7120 but capped by the 200-period SMA at 0.7147. Immediate resistance is noted at 0.7140, with further barriers at 0.7147 and 0.7188. The Relative Strength Index (RSI) around 57 suggests buyers retain some control, though momentum is not strong [1].
CONCLUSION
The Australian Dollar is gaining support from renewed expectations of an RBA rate hike, with upcoming speeches and labor data likely to influence market direction. However, persistent US inflation concerns and global trade developments could temper further AUD gains. Investors remain attentive to key events this week for additional policy signals.