Aussie Holds Firm on RBA Hawkish Outlook

2026-06-17 01:37 By Joshua Ferrer 1 min. read

The Australian dollar held above $0.70, sustaining its rebound from a recent two-month low as the Reserve Bank signaled further tightening to restrain inflation.

After the central bank left the cash rate unchanged at 4.35% at its June meeting, Governor Michele Bullock said the board remains alert to upside inflation risks, stressing that demand still needs to moderate further.

Although the RBA opted to pause in order to assess the full impact of three rate hikes earlier this year, she reiterated that further rate increases cannot be ruled out.

While markets increasingly suspect that the tightening cycle is over, the RBA’s hawkish tone has kept a roughly 50% chance of one final hike this year priced in, but the odds of an August move stands at just 25%.

The upcoming May CPI report due next week will be pivotal for the outlook.

Meanwhile, improving risk sentiment from progress toward a US-Iran peace deal also supported the Aussie, easing concerns over energy-driven inflation pressures.



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Aussie Holds Firm on RBA Hawkish Outlook
The Australian dollar held above $0.70, sustaining its rebound from a recent two-month low as the Reserve Bank signaled further tightening to restrain inflation. After the central bank left the cash rate unchanged at 4.35% at its June meeting, Governor Michele Bullock said the board remains alert to upside inflation risks, stressing that demand still needs to moderate further. Although the RBA opted to pause in order to assess the full impact of three rate hikes earlier this year, she reiterated that further rate increases cannot be ruled out. While markets increasingly suspect that the tightening cycle is over, the RBA’s hawkish tone has kept a roughly 50% chance of one final hike this year priced in, but the odds of an August move stands at just 25%. The upcoming May CPI report due next week will be pivotal for the outlook. Meanwhile, improving risk sentiment from progress toward a US-Iran peace deal also supported the Aussie, easing concerns over energy-driven inflation pressures.
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Australian Dollar Retreats After RBA Pause
The Australian dollar weakened to around $0.705 on Tuesday, moving back toward two-month lows after the Reserve Bank kept interest rates unchanged for the first time this year. In a unanimous vote, the central bank' s nine-member board held the cash rate at 4.35% in response to signs that three rate hikes earlier this year are beginning to filter through the nation’s economy. While policymakers reiterated that inflation remains elevated and warned that higher energy costs pose upside risks, a recent run of softer economic data gave the RBA room to pause and assess the impact of past tightening. Markets now await Governor Michele Bullock’s press conference later today for clues on whether policymakers are leaning toward an extended pause or retaining a tightening bias. Three of Australia’s four largest banks expect the RBA to keep rates unchanged for the remainder of 2026, with some analysts citing slowing economic momentum and even forecasting rate cuts next year.
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Aussie Dollar Gains in Risk-On Rally
The Australian dollar rose above $0.70, building on the previous week’s modest 0.4% gain to rebound from a recent two-month low, as global risk appetite strengthened after the US and Iran reached an interim peace agreement. The deal reportedly includes sanctions relief for Iran, the lifting of blockades, and the dismantling of Tehran’s nuclear program. This lifted sentiment across financial markets, with Asian equities rallying, the US dollar weakening, and oil prices falling sharply. The development also provided relief for central banks ahead of a busy week of policy meetings. In Australia, markets have fully priced out a June rate increase after a series of soft economic data reinforced signs that the Reserve Bank’s three rate hikes earlier this year are gaining traction. The odds of an August hike has also fallen to around 35% from more than 80% a month ago. The May CPI report, due on June 24, will be closely watched for clues on the persistence of underlying price pressures.
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