Brown Brothers Harriman (BBH) analysts report that the Reserve Bank of Australia (RBA) has raised the cash rate target by 25bps to 3.85%, marking the first increase since 2023. This decision was largely anticipated by the market, with inflation expected to remain above target for some time. The RBA indicated that further hikes may be forthcoming, supporting a bullish outlook for AUD/USD.

RBA's rate hike impacts AUD

"AUD/USD rallied back above 0.7000. The RBA voted unanimously to raise the cash rate target by 25bps to 3.85%, the first increase since 2023."

"Moreover, the RBA signaled that more hikes are in the pipeline. The RBA highlights that “private demand is growing more quickly than expected, capacity pressures are greater than previously assessed and labour market conditions are a little tight.”"

"Bottom line: diverging policy between the RBA and Fed supports the uptrend in AUD/USD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)