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Australian dollar edges lower near 0.6970 as RBA leaves rate hikes open

AUD/USD fell about 0.3% as RBA Governor Michele Bullock said the cash rate could be increased further if needed, while US consumer confidence weakened in July.

Reported · Written up by our desk · Major Pairs

The Australian dollar weakened on Tuesday, with AUD/USD trading lower near 0.6970 and down around 0.3%, even after Reserve Bank of Australia Governor Michele Bullock took a hawkish tone.

Bullock warned that underlying inflation remains too high and said the RBA likely needs some further easing in the growth of demand to return inflation sustainably to its 2%–3% target. She added that the RBA board remains prepared to act, including by increasing the cash rate further if needed, although concerns that additional tightening could pressure domestic activity and the labor market weighed on the currency, according to FXStreet.

FXStreet also cited a softer US backdrop, noting the Conference Board Consumer Confidence Index declined to 90.8 in July from a (revised) 92.2 in June, while the Present Situation Index fell for a third straight month to 114.9 and the Expectations Index held at 74.7.

Attention is turning to Australia’s June CPI data on Wednesday, where headline CPI is expected to rise 0.2% month over month after a prior 0.7% decline, with annual inflation forecast to stay elevated at 4.0%. In the near term, FXStreet said AUD/USD is holding a bearish bias on its charts while trading below nearby moving averages around 0.6971 and 0.6983.

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