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AUD/USD Extends Gains After RBA Surprise

By MarketPulse (Kenny Fisher)CurrenciesJun 06, 2023 05:54AM ET

www.investing.com/analysis/audusd-extends-gains-after-rba-surprise-200638762

By MarketPulse (Kenny Fisher) | Jun 06, 2023 05:54AM ET

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AUD/USD

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AUD/USD rally continues for fourth straight day
RBA surprises with 25-bp hike
Australia releases GDP early Wednesday

The Australian dollar continues to roll and has extended its rally on Tuesday. In the European session, AUD/USD is trading at 0.6659, up 0.63% on the day. The Aussie has sparkled in June, surging 2.4%.

On the economic calendar, Australia releases GDP early on Wednesday. The markets are expecting a solid gain of 2.7% in the first quarter, up from 2.4% in Q4 2022.

RBA surprises with a hike

The markets were confident that the RBA would pause at today’s meeting, projecting a 67% chance of a hike. I wrote yesterday that although a pause was likely, Governor Lowe has a habit of surprising the markets. Well, make that the second straight month that the markets have guessed wrong about a pause, with the RBA hiking each time by 25 basis points. Even with the surprise hike, the benchmark cash rate of 4.10% remains below most of the major central banks, including the Federal Reserve.

Australian inflation has been heading in the right direction, dropping from 7.8% to 7.0% in April. This is evidently not fast enough for the RBA, which has a target of 2-3%. Governor Lowe has been hawkish and said last week that the Bank will do whatever it takes to bring inflation back down to target so perhaps the real surprise is why the markets keep expecting a pause when Lowe keeps repeating that inflation is way too high.

Lowe reiterated this position in the rate statement, saying that “inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range”. Households and businesses will feel even more pain from the hike, but that’s a price the RBA believes is necessary to beat public enemy number one – inflation.

AUD/USD Daily Chart

AUD/USD Technical

AUD/USD tested resistance at 0.6677 earlier in the day., Above, there is resistance at 0.6749
There is support at 0.6568 and 0.6496

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AUD/USD Extends Gains After RBA Surprise

RBA surprises with a hike

AUD/USD Technical

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