FX.co ★ Australian Dollar Dips on Dovish RBA

The Australian dollar declined to approximately $0.652 on Wednesday, retracing gains made in the previous session following the Reserve Bank of Australia's dovish rate cut, which continued to weigh on the currency. On Tuesday, the central bank lowered its official cash rate as anticipated, indicating the potential need for further easing to meet its inflation and employment objectives in light of slowing economic momentum. Additionally, the bank revised its 2025 GDP growth forecast downwards from 2.1% to 1.7%, citing weak public demand at the start of the year that appears unlikely to rebound. Current market sentiment suggests a mere 34% probability of another rate reduction in September, though two more cuts by early 2026 are fully priced in, potentially bringing the rate down to about 3.1%. Meanwhile, a softer U.S. dollar due to increasing expectations of September rate cuts by the Federal Reserve limited further declines of the Australian dollar. Moreover, the Aussie currency found support in rising iron ore prices, as the ongoing U.S.-China trade truce extension bolstered demand for Australia’s abundant resource exports.