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This article is a follow up to: Australian dollars face pressure from US growth concerns
The Australian dollar (symbol: AUDUSD) hit a near one-week high as investors continued to weigh the implications of the latest Reserve Bank of Australia (RBA) monetary policy decision.
The Aussie also benefited from expectations that the US Federal Reserve will cut interest rates more aggressively in the coming months.
Picture: AUDUSD rises on hawkish hold from the RBA, as observed on the new and updated VT Markets app.
The RBA held the cash rate steady at 4.35% for the sixth consecutive meeting, as widely anticipated. However, the central bank issued a stern warning that inflation remains too high, indicating that a rate cut is not on the table in the near term.
This hawkish stance was seen as supportive for the Australian dollar as it suggests continued efforts to control inflation, which can attract foreign investment and boost currency value.
Related article: Interest rate tug-of-war: Hawkish vs dovish
The RBA highlighted a stronger outlook for domestic demand, driven by higher public spending and a recovery in household consumption. This optimism about domestic demand further supported the Australian dollar.
However, one point to note is that the Australian industry index has remained contractionary for the 27th consecutive month in July, indicating ongoing challenges in both domestic and external demand.
The hawkish tone from the RBA, coupled with expectations of aggressive rate cuts by the US Federal Reserve, suggests a favourable environment for the Aussie. Traders should monitor upcoming economic data and RBA statements for further cues on interest rates and economic conditions.
Despite a prolonged contraction in the Australian industry index, the overall positive outlook from the RBA provided a bullish sentiment for the Australian dollar.
