AUD/USD Flattens as Expectations for More Interest Rate Hikes Loom

The Australian Dollar (AUD) has been trading relatively stable at around 0.7117 against the US Dollar (USD) during the European session on Tuesday.

This stability is largely due to expectations that the Reserve Bank of Australia (RBA) will continue tightening its monetary conditions, despite already delivering three interest rate hikes this year.

RBA Governor Michele Bullock pointed out that high inflation in Australia is being driven by energy supply shocks and strong demand. She noted that neutral rates are rising globally, which is pushing up real bond yields.

The Federal Reserve (Fed) is also expected to deliver more interest rate hikes this year, with the CME FedWatch tool indicating a nearly 90% chance of at least one more hike.