RBA Keeps Rates Steady, Provides Hawkish Outlook Amid Inflation Concerns

RBA Keeps Rates Steady, Provides Hawkish Outlook Amid Inflation Concerns

RBA Holds Interest Rate Steady at 4.35%, Warns of Potential Rate Hikes

The Reserve Bank of Australia (RBA) opted to maintain interest rates at 4.35% during its recent meeting, aligning with market expectations. While acknowledging progress in curbing goods inflation, the Board expressed concerns over lingering pressures in services inflation, hinting at potential upward risks.

Highlighting a scenario where demand surpasses supply, the RBA hinted at the possibility of resorting to rate hikes to mitigate threats to the 2-3% inflation target. This cautious stance underscores the central bank's commitment to preserving a balanced inflation outlook. Stay informed with live economic data via our DailyFX economic calendar.

The RBA's recent rate hike in November 2023 reflects Australia's ongoing struggle in managing inflation amid global economic uncertainties. Meanwhile, AUD/USD saw a notable uptick following the RBA's hawkish tone on inflation.

Although the Australian dollar experienced a rebound post-RBA meeting, its broader downtrend persists. AUD/USD witnessed a significant decline earlier this year, triggered by recalibrations in US market expectations regarding rate cuts. Despite brief consolidation within a bearish flag pattern, the pair breached key support levels, including the 0.6520 zone and the 200-day simple moving average.

The continuation of bearish momentum remains likely unless bulls manage to close above the 0.6520 level. Absent such a breakthrough, further support levels at 0.6460 and 0.6365 come into play. Additionally, ongoing challenges in the Chinese economy, including regulatory restrictions on stock borrowing and struggles in the real estate sector, are expected to weigh on AUD's potential upside.

Traders' sentiment, characterized by a net-long position, suggests a bearish outlook for AUD/USD. While positioning has seen some adjustment, the combination of current sentiment and recent changes indicates a mixed trading bias for AUD/USD. Stay informed and adapt your trading strategy accordingly.