FX.co ★ Australian Dollar Retreats After RBA Pause

The Australian dollar weakened to about $0.705 on Tuesday, edging back toward a two-month low after the Reserve Bank of Australia left interest rates unchanged for the first time this year. In a unanimous decision, the RBA’s nine-member board held the cash rate at 4.35%, citing evidence that the three rate increases earlier in the year are starting to flow through the economy. Policymakers reiterated that inflation remains elevated and cautioned that higher energy prices present upside risks. However, a recent stretch of softer economic data has given the central bank room to pause and evaluate the effects of previous tightening. Markets now turn to Governor Michele Bullock’s press conference later today for signals on whether officials are inclined toward a prolonged pause or intend to preserve a tightening bias. Three of Australia’s four largest banks expect the RBA to keep rates on hold through the end of 2026, while some analysts, pointing to weakening economic momentum, are even forecasting rate cuts next year.