RBA Holds Steady as AUD Gains Traction

The Reserve Bank of Australia (RBA) decided to keep its cash rate unchanged at 4.35%, while maintaining a modest tightening bias, according to OCBC's analysts Sim Moh Siong and Christopher Wong.

The RBA's decision was seen as less hawkish than expected by the markets, with Governor Bullock noting that the Board actively considered a hike in August, unlike at the June meeting.

Despite this, the analysts remain constructive on the Australian Dollar (AUD) over the next one to two quarters, citing its attractive carry profile and potential for further Chinese policy stimulus as key factors.

The RBA is likely at the peak of its tightening cycle, but sticky inflation means that another rate hike cannot be ruled out. However, over the medium term, the analysts expect AUD gains to become more measured as growth slows and inflation moves back towards target.