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Australian dollar jumps on hawkish RBA

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The Australian dollar has posted strong gains on Tuesday. In the European session, AUD/USD is trading at 0.6624, up 0.59% on the day.
RBA holds rates, stays hawkish
Nobody should have been surprised that the Reserve Bank of Australia maintained interest rates on Tuesday. The hold was widely priced in by the markets and marked the eighth straight meeting that the central bank has maintained rates. The RBA has turned into an outlier among major central banks, most of which have responded to lower inflation by trimming rates.
Australia’s inflation rates has also been on a downswing and headline CPI fell to 2.8% y/y in Q3 2024, within the RBA’s target of 2%-3%. Still, core CPI remains higher and services inflation has been sticky and is running at 4.6%.
The RBA had a hawkish message for the markets at today’s meeting. The rate statement said that the Bank was “not ruling anything in or out”. Governor Bullock added at her press conference that there were “still some risks on the upside” and singled out services inflation as evidence that there was “still a significant amount of inflation in the system”.
What can we expect from the RBA? The December meeting will probably see the central bank remain on the sidelines and an initial rate cut is not likely before February 2025. The rate path will depend greatly on inflation – if it continues to weaken, that would bolster the case for a rate cut. Another key factor will be the labor market, which has remained relatively strong despite a sluggish economy. If cracks appears in the labor market in the coming months, expectations for a rate cut will increase.
AUD/USD Technical
  • AUD/USD has pushed above resistance at 0.6595 and is testing resistance at 0.6611. Above, there is resistance at 0.6635
  • There is support at 0.6571 and 0.6555

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Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
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