The AUD/CAD currency pair edged lower on Tuesday, as the Australian Dollar demonstrated a muted reaction to the Reserve Bank of Australia’s latest policy decision.
The RBA raised its official cash rate by 25 basis points to 4.35% at its May meeting, in line with market expectations. Eight members backed the hike, while one policy maker preferred to hold rates at 4.10%.
In its Monetary Policy Statement, the RBA said inflation had surged sharply in H2 2025. It pointed to several drivers, including capacity constraints, higher fuel and commodity prices, and the Middle East conflict.
In addition, businesses continued to pass higher costs to consumers through price increases. As a result, short-term inflation expectations have also increased.
Meanwhile, concerns about a possible further flare-up in Middle East tensions, amid a US-Iran confrontation over the Strait of Hormuz, are providing a lift to Crude Oil prices. And, that strength in Oil is supporting the commodity-linked Canadian Dollar, exerting downward pressure on the Forex pair.
The AUD/CAD currency pair was last down 0.09% on the day to trade at 0.9749.
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