The Reserve Bank of Australia (RBA) has reduced its official cash rate (OCR) by 25 basis points to 3.85%, down from 4.10%. The decision was announced following the RBA’s monetary policy meeting on Tuesday at 04:30 GMT.
This move had already been widely expected by the market and was reflected in the Australian dollar’s (AUD) price action. At the time of writing, the AUD/USD exchange rate was down 0.43% on the day, trading around 0.6425.
Market Awaits RBA Governor’s Comments and Economic Forecasts
Alongside the rate cut announcement, the RBA released updated economic forecasts. A press conference featuring RBA Governor Michelle Bullock took place at 05:30 GMT, where her comments on the economy and future interest rate moves drew keen attention.
Traders focused heavily on Governor Bullock’s tone and outlook. She is expected to maintain a cautious stance, emphasizing uncertainty especially due to external risks such as U.S. tariffs. Bullock is likely to stress the need for a careful approach and warned against rushing future policy changes.
Recent Economic Data Clouds Future Rate Outlook
Recent Australian economic data has complicated market expectations for further rate cuts this year. In April, the economy added 89,000 jobs—well above forecasts of 20,000. The unemployment rate held steady at 4.1%, supported by a revised stronger jobs figure from March.
Inflation data also surprised on the upside. The consumer price index (CPI) rose 2.4% year-over-year in the first quarter, beating expectations and matching the prior quarter’s growth. The trimmed mean CPI, closely watched by the RBA, increased 0.7% month-on-month and 2.9% year-over-year—just inside the RBA’s target range of 2%-3%.
Wages are also rising faster than expected. The wage price index climbed 3.4% annually in Q1, higher than the previous 3.2%, with a 0.9% quarterly gain exceeding forecasts.
The strong labor market combined with sustained inflation pressure suggests the RBA may adopt a cautious outlook, weighing the risks before making further moves.
Analysts Weigh In on RBA’s Policy and AUD/USD Outlook
Analysts at TD Securities noted that the market has fully priced in the 25 basis point cut. They will closely watch how the RBA assesses tariff risks and any revisions to GDP and inflation forecasts.
Dhwani Mehta, Chief Analyst at FXStreet, highlighted technical signals for the AUD/USD pair after the announcement. The currency is consolidating between its 200-day and 50-day simple moving averages (SMA), with the 14-day relative strength index (RSI) near 53, suggesting moderate bullish momentum.
Mehta explained the possible price paths:
If the RBA adopts a dovish tone, AUD/USD could drop toward the 50-day SMA near 0.6333. Falling below this level might push it further to the 100-day SMA around 0.6299. The psychological support at 0.6250 could limit losses.
On the upside, breaking above the 200-day SMA at 0.6452 would open the door for a rally toward the November 25 high of 0.6550, and potentially challenge the 0.6600 resistance.
Cautious Optimism for AUD
While the RBA’s rate cut was expected, the currency’s next direction depends largely on Governor Bullock’s guidance and the evolving economic landscape. With strong jobs data and persistent inflation, the RBA’s cautious tone could encourage the Australian dollar’s recovery—or, if concerns grow, push it lower in the near term. Traders will watch upcoming data and global trade developments closely for clues on future moves.
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