EUR/AUD falls as RBA does not rule out more rate hikes

The EUR/AUD currency pair weakened on Tuesday, after the Reserve Bank of Australia warned further policy tightening could not be ruled out, since inflation was still elevated and cost of services was not decreasing quickly enough.

The central bank left its cash rate without change at 4.35% at its February meeting, as largely expected.

Tuesday’s decision came after the RBA had delivered a total of 425 basis points of interest rate hikes over the course of two years to rein in a spike in inflation.

The RBA Board again said that the path of interest rates would depend on the data and the evolving assessment of risks.

RBA policy makers noted they needed to be confident that inflation would go back down to the target range of 2% to 3% in 2025 and to the midpoint in 2026.

“A slightly more hawkish set of comments than anticipated, particularly after the weakness in recent inflation data,” Dwyfor Evans, head of APAC macro strategy at State Street Global Markets, was quoted as saying by Reuters.

“We continue to focus on weaker consumption, elevated debt servicing costs and signs of easing in the job market as pointers towards a more accommodative stance going forward.”

Next, in terms of macro data, Euro traders will be paying attention to the December report on Eurozone retail sales due out at 10:00 GMT today.

As of 7:37 GMT on Tuesday the EUR/AUD currency pair was edging down 0.28% to trade at 1.6518. The minor Forex pair has rebounded from an 18-day low of 1.6349, which it registered on January 30th.