- AUD/USD steadies above 0.6500 ahead of the RBA monetary policy decision on Tuesday.
- The RBA is widely expected to cut the cash rate by 25 bps to 3.60%, with traders closely watching the RBA Monetary Policy Statement and RBA Press Conference for updated economic forecasts.
- The Central bank held rates at 3.80% in July after two consecutive cuts, citing caution on inflation and global uncertainties
The Australian Dollar (AUD) trades with a slightly negative tone against the US Dollar (USD) on Monday, with AUD/USD holding steady above the 0.6500 level as investors brace for Tuesday’s Reserve Bank of Australia (RBA) monetary policy decision. Markets are fully pricing in a 25 basis point cut to 3.60%, with attention focused on the central bank’s forward guidance and updated economic forecasts, which will shape the next leg for AUD/USD.
At the time of writing, the AUD/USD pair is trading around 0.6513, trimming some part of its intraday losses. Meanwhile, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is staging a modest recovery from a two-week low, hovering near 98.50 ahead of Tuesday’s key US inflation data.
The RBA held the cash rate unchanged at 3.80% in its last meeting in July after two consecutive cuts earlier in the year. The RBA’s reasoning for the hold was a cautious approach to inflation and global economic uncertainties, particularly with new tariffs from the United States. The board was divided on the decision, with a majority of six members voting to hold and three voting for a rate cut.
The latest data show Australia’s annual headline inflation eased to 2.1% in Q2, while the trimmed mean measure slowed to 2.7%, comfortably within the RBA’s 2-3% target band. A softer labour market backdrop adds to the case for further easing, with June’s Unemployment Rate ticking up to 4.3% and total hours worked declining. Retail sales posted a modest rebound in June, up 1.2% after a 0.5% rise in May, though household demand is still muted.
The RBA’s policy tone will be the key driver for the AUD/USD in the near term. A straightforward 25 bps cut paired with a cautious, data-dependent outlook may limit downside pressure on the Aussie, especially given the currency’s already heavy speculative short positioning. According to the latest Commitment of Traders (COT) report, non-commercial net shorts in AUD/USD rose to -83.6K contracts in the week ending August 5. This positioning leaves the pair vulnerable to a short-covering rally if the RBA delivers a less dovish message than markets expect.
On July 24, Governor Michele Bullock reiterated the RBA’s “dual mandate” of achieving price stability and full employment, stressing that while easing is likely, the pace will depend on confirming evidence from inflation and labour data.
From the US side, this week’s inflation data will also shape sentiment toward the Greenback. The Consumer Price Index (CPI) on Tuesday and the Producer Price Index (PPI) on Thursday will be watched closely, as markets are currently pricing in an 88% probability of a 25 basis point rate cut by the Federal Reserve in September, following July’s soft labor market data. A hotter-than-expected CPI or PPI reading could dampen expectations for aggressive easing and lending support to the USD, while softer prints may reinforce dovish bets and cap upside in the Greenback.
Economic Indicator
RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
