AUD Surges Ahead of RBA Rate Hike Decision

The Australian Dollar (AUD) has strengthened against its major currency peers on Monday, except for the US Dollar (USD), as investors anticipate a rate hike by the Reserve Bank of Australia (RBA) at its policy meeting on Tuesday.

Analysts at ING expect a 25-basis point rate hike to 4.60%, which is already priced in by markets. The key factor that will influence the AUD's reaction will be the tone of the RBA, specifically whether Governor Michele Bullock leaves the door open for further hikes.

ING strategists believe that Governor Bullock will indeed leave the door open for more hikes due to elevated inflation concerns. They point out that even if crude prices decline, domestic fuel prices are set to remain sticky, and core CPI measures have remained hot, with a tight labour market and stronger-than-expected growth.

Against the US Dollar (USD), the Australian Dollar is down by nearly 0.1% to around 0.7017 at the time of writing. The US Dollar outperforms due to elevated US Treasury Yields amid expectations of another interest rate hike by the Federal Reserve this year.