Experts agree: RBA’s next move will likely be an interest-rate cut, not a hike
- The Australian Dollar trades lower as the RBA is unlikely to deliver more interest rate hikes this year.
- The RBA has already raised its OCR three times by 25 bps to 4.35% this year.
- Australian CPI cooled down to 4.2% YoY in April.
The Australian Dollar (AUD) underperforms its major currency pairs during the European trading session on Wednesday, trading 0.25% lower to near 0.7010 against the US Dollar (USD).
The antipodean faces selling pressure as the latest reports from various banks have signaled that fears of more interest rate hikes by the Reserve Bank of Australia (RBA) have waned.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | 0.00% | 0.02% | -0.12% | 0.35% | 0.13% | 0.08% | |
| EUR | 0.08% | 0.05% | 0.09% | -0.06% | 0.36% | 0.21% | 0.16% | |
| GBP | -0.00% | -0.05% | 0.04% | -0.11% | 0.32% | 0.16% | 0.09% | |
| JPY | -0.02% | -0.09% | -0.04% | -0.15% | 0.29% | 0.10% | 0.03% | |
| CAD | 0.12% | 0.06% | 0.11% | 0.15% | 0.44% | 0.25% | 0.18% | |
| AUD | -0.35% | -0.36% | -0.32% | -0.29% | -0.44% | -0.18% | -0.24% | |
| NZD | -0.13% | -0.21% | -0.16% | -0.10% | -0.25% | 0.18% | -0.07% | |
| CHF | -0.08% | -0.16% | -0.09% | -0.03% | -0.18% | 0.24% | 0.07% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
So far this year, the RBA has already raised its Official Cash Rate (OCR) by 75 basis points (bps) to 4.35%.
Analysts at National Australia Bank (NAB) said, "The next move in the cash rate is likely to be down, but the timing is uncertain,” citing uncertainty over both economic activity and inflation, news.com.au reported.
Meanwhile, Commonwealth Bank economists have stated that interest rates will be held at 4.35% until May 2027, when the cutting cycle begins.
Australia’s Consumer Price Index (CPI) data for April also arrived lower at 4.2% Year-on-Year (YoY) than 4.4% estimates and the March reading of 4.6%.
This is a sharp turnaround from the 80% possibility of an interest rate hike by the RBA in the August 2026 meeting, Reuters reported after the release of the 2026 budget, in which Australian Treasurer Jim Chalmers lowered the tax rate for citizens having income between $18,201 and $45,000 to 15% from 16% starting July 2026. This will be further lowered to 14 from July 2027.
For more cues on the RBA’s monetary policy outlook, investors will focus on the June policy announcement on Tuesday, in which the central bank is expected to leave its OCR steady at 4.35%.
In the European trade, the US Dollar Index (DXY) trades lower to near 99.90 ahead of the United States (US) Consumer Price Index (CPI) data for May, which will be published at 12:30 GMT.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
