AUD Bounces Back as RBA Retains Tightening Bias

The Australian Dollar (AUD) has regained some ground lost over the past three days and reclaimed the key 0.7100 hurdle, thanks in part to a generalised knee-jerk weakness in the US Dollar (USD). The AUD/USD pair's current positive stance is propped up by the Reserve Bank of Australia's (RBA) hawkish policy bias and elevated inflation in Oz.

Australia's economy continues to compare favourably with many of its G10 peers, supported by domestic demand and positive economic growth. However, business activity remained in expansionary territory in August after final Purchasing Managers' Index (PMI) readings showed the Manufacturing index unchanged at 52.0, while the Services index edged a tad down to 53.2.

Trade data provided another positive signal: Australia recorded an A$1.923 billion surplus in July, adding to the A$2.341 billion surplus registered in June. Growth figures were less encouraging, however, with the Gross Domestic Product (GDP) expanding by 0.4% QoQ in the second quarter of 2026, up from 0.3%, while annual growth came in at 2.1%, down from the previous 2.5% yearly expansion.

The RBA retains a tightening bias and has left its Official Cash Rate (OCR) unchanged on August 11, citing above-target inflation and upside risks to the outlook. Markets are pencilling in roughly 37 basis points of tightening by year-end and expect the RBA to hike the OCR by 25 basis points at its September 29 meeting.

The medium-term outlook remains tilted towards further gains for AUD/USD as long as it stays above its 200-day Simple Moving Average (SMA), which is currently around 0.7010. However, a breach below this area would weaken the broader constructive structure and increase the risk of a deeper short-term decline.