The Reserve Bank of Australia maintains a hawkish stance on inflation, keeping rates at 4.35% while markets price in a 21% chance of a September hike.
AUD/USD trades at 0.7055, unchanged on the day, as the Reserve Bank of Australia’s cautious inflation outlook supports the currency. The RBA kept its key interest rate at 4.35% on Tuesday but signaled readiness to hike further if price pressures persist, with Governor Michele Bullock noting rate hike discussions within the Board.
Markets currently assign a 79% probability to the RBA holding rates steady at its September 29 meeting, while a 25-basis-point hike remains a 21% possibility. In the U.S., cooling inflation data has reduced expectations of a Federal Reserve rate hike, with annual CPI slowing to 3.4% in July and core inflation dipping to 2.5%.
The pair’s consolidation follows a brief rise above 0.7090 on Wednesday, as geopolitical tensions and diverging monetary policy outlooks keep traders cautious.