Australian Dollar: RBA hawkish pause and softer data – UOB

UOB Global Economics & Markets Research notes that AUD/USD was little changed after the Reserve Bank of Australia paused at 4.35% following three consecutive 25 bps hikes. The RBA kept a clear tightening bias as inflation remains high, but UOB’s base case is for an extended pause, with restrictive financial conditions and weaker household demand expected to gradually ease price pressures.

Australian Dollar holds on RBA pause

"Following three consecutive 25-bps hikes in Feb, Mar and May, the Reserve Bank of Australia (RBA) decided to pause in Jun, citing the need to assess lagged tightening effects, amid signs the economy is beginning to soften."

"However, the RBA also maintained a clear bias to hike again if needed given inflation remains “too high”, while highlighting heightened uncertainty from global energy risks and potential stagflationary outcomes. For now, our base case remains that the RBA will extend its pause over the coming meetings."

"This reflects our view that restrictive financial conditions, together with weaker household demand and rising unemployment, will gradually dampen inflationary pressures. However, risks remain tilted in both directions."

"AUD/USD closed largely unchanged at 0.7067 (-0.07%) after the RBA held interest rates unchanged for the first time this year, as expected."

"Australia: Hawkish hold by RBA at 4.35%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)