The Australian dollar weakened to $0.70 on Tuesday, paring gains from the previous session, even after the Reserve Bank of Australia (RBA) delivered its first back-to-back interest rate increases since mid-2023. The central bank lifted the cash rate to 4.1%, marking a second consecutive monthly hike and effectively reversing two of last year’s cuts. The move highlights the RBA’s continued struggle to contain stubborn inflation, driven in part by rising energy costs amid escalating tensions in the Middle East.
Markets are also pricing in another rate increase in May, which would take the cash rate to 4.35% and fully unwind the 75 basis points of cuts implemented during last year’s six-month easing cycle. Investors will closely monitor RBA Governor Michele Bullock’s post-meeting press conference for guidance on the bank’s policy outlook. Focus will then shift to Thursday’s labor market report, which will be scrutinized after Governor Bullock recently emphasized that conditions remain tight.
