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The Australian Dollar weakened after a unanimous RBA vote trimmed near-term rate hike expectations.
The Australian Dollar is broadly weaker, turning in a softer performance against the Euro, Pound and US Dollar in the wake of the Reserve Bank of Australia's August policy decision where interest rates were left unchanged in an unanimous decision.
"AUD/USD fell by around 0.3% to near 0.7040 after the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 4.35%. The policy decision was unanimous," says Samara Hammoud, an analyst at Commonwealth Bank.
For the Pound-to-Australian Dollar rate, the Aussie's stumble provides timely relief, helping the pair further cement a floor above the 100-day moving average as it rises to 1.9160.
Why a Unanimous Hold Reads Dovish
The market reaction owes more to positioning than to any softness in the statement itself.
Traders went into the meeting knowing three hikes had been delivered this year and that hot second-quarter inflation had kept the tightening debate alive, so some had positioned for a dissenting hawk or two on the Board.
Instead, as with Governor Bullock's Anika Foundation speech last month, the hawkish scenario failed to materialise, and for the second event running the disappointed positioning was forced to unwind.
That reading was reinforced by the accompanying Statement on Monetary Policy, in which Hammoud notes "the RBA forecast a slightly higher unemployment rate across the forecast horizon, while also revising GDP growth slightly higher."
A central bank nudging its unemployment projections up is not a central bank preparing the ground for imminent tightening, and some forecasters were quick to draw the conclusion.
"After three rate hikes during the spring, RBA is unlikely to tighten its policy rate further at the coming meetings," says Danske Bank.
Where Next for the Pound? Get the Quarterly Forecast Report
Point forecasts, highs and lows from global banking partners, out to early 2027.
But the Trigger Is Written Down
Reading the statement as a retirement of the hiking cycle would nevertheless overreach, because the Board took care to spell out the conditions for further action.
"The Board will increase the cash rate target further if upside risks materialise," says Uma Choudhury, strategist at Westpac, highlighting the statement's key line:
"The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise."
The Board also acknowledged that higher fuel prices are being passed through to the prices of other goods and services, warning inflation is likely to remain high for some time, and does not expect a return to around the midpoint of the target range until late 2027, with upside risks to that projection.
Policy was described as "somewhat restrictive", language that leaves the door to further tightening ajar rather than closed.
The result is a hawkish document that produced a dovish reaction, and the gap between the two is the space the data will now adjudicate: upcoming inflation and labour market readings decide whether the priced-out hikes return.
