Markets price in a potential RBA rate hike to 4.6% this year as US GDP growth slows to 1.5% in Q2, below expectations.
The AUD/USD pair climbed to 0.7035, its highest level since June 17, driven by softer US economic data and expectations of further Reserve Bank of Australia tightening. The RBA’s hawkish stance, with markets fully pricing in a rate hike to 4.6% by year-end, supported the Aussie’s gains.
US GDP growth decelerated to 1.5% in Q2, missing the 2.1% consensus forecast and down from 2.1% in Q1. The weaker-than-expected print weighed on the USD, while RBA Governor Michele Bullock warned that underlying inflation remained elevated, signaling potential further policy action.
Geopolitical tensions in the Middle East could limit USD downside, though the immediate focus remains on diverging monetary policy outlooks between the RBA and the Federal Reserve.