Aussie dollar rebounds after RBA rate hike
AUD/USD has rebounded overnight following the RBA’s first rate hike since 2010. Australia’s central bank raised rates by 25 basis points from 0.10% to 0.35% , in the face of runaway inflation, defying speculation of a first rate hike at the next meeting in June.
Indeed, the consensus was not entirely certain that the RBA would raise rates last night due to the holding of the federal election at the end of the month. In the past, the central bank has tended to wait until after elections before starting to raise rates.
This rate hike marks the start of the RBA’s rate hike cycle, which is expected to be raised by 25 basis points each month until the end of the year according to market participants’ expectations. The RBA is expected to end its rate hike cycle when inflation, currently at 5.1%, stabilizes within its target range of 2-3%.
AUD/USD could take advantage of this rate hike to rebound in the short term, but the difficult health situation in China and the global economic slowdown will remain significant headwinds for the Australian dollar. As such, a major bullish reversal seems relatively unlikely at this time.
AUD/USD daily price chart – key levels