Aussie Rallies as RBA Signals More Rate Hikes Ahead

Key Moments

RBA’s Hawkish Bias Supports Australian Dollar

AUD/USD advances for a second straight day, with the pair trading near 0.7090 during Asian hours on Monday. The move reflects renewed strength in the Australian Dollar (AUD) as investors respond to the Reserve Bank of Australia’s (RBA) firm policy stance.

Analysts at Societe Generale note that the RBA maintained a robustly hawkish tone, emphasizing that “the statement was hawkish” and that Governor Michele Bullock “declared the bank would not hesitate to act if needed,” highlighting the central bank’s readiness to tighten policy further if inflation does not slow as anticipated.

Rabobank’s strategy team similarly questions whether the RBA has finished its tightening phase. They underline that recent messaging from Governor Bullock leaves the possibility of further action alive. In this context, the bank reiterates that it is “unconvinced” the current policy stance will be sufficient and therefore “continue to expect one more hike later this year.”

Soft US Data Weighs on Dollar, Lifts AUD/USD

The AUD/USD pair also gains support from a weaker US Dollar (USD), which has been pressured by softer-than-expected US macroeconomic releases and evolving central bank expectations.

According to the US Census Bureau, Retail Sales declined by 0.6% month-over-month in July, reversing a 0.2% increase in June and missing the consensus forecast of a 0.1% rise. On a yearly basis, Retail Sales grew 5.0% in July, down from 6.8% in the prior month.

A series of milder US indicators, including CPI, PPI, and Retail Sales, has prompted traders to scale back expectations for additional Federal Reserve rate hikes. Market pricing now reflects a 33.1% probability of a rate increase next month, down from 44% a week earlier, based on the CME FedWatch tool.

Key US Data and Fed Expectations Snapshot

Goolsbee’s Remarks Shift Fed Tone Slightly Dovish

Comments from Federal Reserve official Austan Goolsbee have further nudged market perceptions toward a less hawkish Fed path. His latest speech reflected a softer stance on inflation, captured by an FXS Speechtracker score of 4.6/10, which stands below the historical average of 6.8/10 and signals a more dovish tone relative to the usual baseline.

The speech underscored “a little bit better” inflation outcomes, framed tariff and oil shocks as transitory, and expressed confidence that inflation can ease back toward 2% if these effects subside. The US economy was described as “steady,” and the overall communication pointed to growing comfort with ongoing disinflation, marginally lowering the perceived threshold for future policy easing if incoming data remain supportive.

The FXS Fed Sentiment Index declined by 2.36 points to 134.61 following these remarks, indicating a modest dovish shift in perceived policy tone. Nonetheless, with the index still significantly above the 100 neutral mark, the Fed continues to be viewed as firmly hawkish. This suggests the US Dollar retains structural policy support, even as markets adjust to a slightly less aggressive tightening trajectory.