If you are like me (based in the UK) you may have woke up this morning to a surprise from the RBA, impacting the Aussie dollar. The RBA left rates unchanged, which was a shock to most traders.
RBA Plays Hawkish Hide and Seek
Market forecasts had pretty much priced in a solid chance that the central bank would cut interest rates by 25 basis points or 0.25%.
How wrong they were.
The Aussie economy has been showing signs of pressure, higher mortgage rates, soft consumer sentiment and the property market woes, pointed to some stimulus coming.
However, the Reserve Bank of Australia focused on the sticky inflation numbers instead.
Inflation failing to fall below 2.5% was the pain point for the RBA.
Without this consistently moving lower, the RBA may be forced to hold rates higher.
AUD Goes Bullish
The AUD/USD price and most of the AUD crosses shot higher on the data, and throughout the trading session today, little has changed.
AUD/JPY is the standout gaining 0.92% on the day.
It’s important to understand why this is bullish for the currency.
FX largely works on interest rates differentials or at least contrasts between central banks.
This hold by the RBA differs from policy by the RBNZ or the BoC who lean more on the dovish side.
This could give me the opportunity to trade.
AUD/NZD Breaks Higher
The battle of the antipodeans shows the Aussie in control.
On the chart we can see the price has broken out of a triangle consolidation pattern as is aiming for the recent May 2025 highs.
A break above this level could suggest a move into the higher volume levels found around 1.1000.
This is one I will be keeping a very close eye on, especially if inflation remains sticky in Australia.
To summarise:
RBA held rates – surprising markets expecting a cut.
Inflation remains sticky – giving the RBA reason to stay hawkish.
AUD rallied – particularly against NZD and JPY, with AUD/JPY up nearly 1% on the day.
Central bank divergence – RBA is holding firm while RBNZ and BoC lean dovish.
AUD/NZD broke higher – bullish technical breakout, eyeing 1.1000 as next resistance.
Whether this will be sustainable, we will have to wait for further data. What’s for sure is that the RBA want to see inflation lower to cut rates more confidently.
