AUD/USD: Upside potential from the Australian side likely to remain limited – Commerzbank

The Reserve Bank of Australia (RBA) raised interest rates by 25 bps. However, AUD was unable to benefit. Economists at Commerzbank analyze Aussie’s outlook.

RBA delivers dovish rate hike

RBA raised interest rates again after four previous meetings with no change. The main reason for this was the uncertain inflation outlook. Inflation in Australia is proving to be quite persistent, justifying a further rate hike.

The RBA did change the wording of the statement slightly, which led to the hike being perceived as a 'dovish hike'. Now the RBA simply says that whether further tightening will be required will depend on the data. This suggests that the bar for another hike has been raised.

If the upcoming data points to continued stubborn inflation, a rate hike could be back on the agenda. Until then, however, the upside potential from the Australian side is likely to remain limited and much will depend on the movement of the USD.