AUD/USD Eyed by Investors as Market Remains Bullish on RBA Hikes

The Australian GDP growth remained modest in Q2, but it didn't challenge expectations for further Reserve Bank of Australia (RBA) tightening. The economy grew 0.4% q/q and 2.1% over the year, a pace that hardly screams overheating. Household consumption rose 0.4% q/q and 1.8% y/y, while GDP per capita was effectively flat for the quarter but remained 0.7% higher over the year.

The details of the report and more recent data do little to rule out another RBA hike. The market continues to price in two additional RBA hikes over the coming year, with one-year OIS rising to around 4.80% against the current 4.35% cash rate.

Despite growing calls for an RBA hike, the Australian dollar has continued to retrace alongside a firmer US dollar. However, AUD/USD is now sitting just beneath its 10-day EMA, and bulls are seeking evidence of swing lows around support to rejoin the dominant trend.