Australian Dollar: RBA hike to support AUD/USD – BBH
Brown Brothers Harriman highlights that the Reserve Bank of Australia delivered a widely expected 25 bps hike to 4.60%, a 15-year high, and kept the door open to further tightening. AUD/USD initially rallied on the hawkish statement but reversed as Governor Michele Bullock signaled less urgency.
The Reserve Bank of Australia (RBA) increased its official cash rate by 25 basis points to 4.60%, marking the fourth rate hike in 2026. This decision, widely anticipated, left the door open for further tightening if necessary. However, Governor Michele Bullock's cautious remarks following the hike caused AUD/USD to reverse a brief uptick and turn lower, reaching nine-week lows below 0.7000 in the European morning.
The RBA's statement acknowledged that some inflation risks initially flagged in August were now materializing. Despite the hawkish tone, Bullock expressed hope that four hikes this year would suffice, along with a possible pause if conditions warranted. This decision helps AUD/USD maintain support, as the futures price in 36bps of tightening over the next twelve months limits divergence with the Federal Reserve and the Bank of Japan.
Australia's strategic exposure to commodities, including energy, AI, and defense, remains a long-term tailwind for the Australian Dollar.
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