Australian Dollar trades broadly firm amid hawkish RBA bets

The Australian Dollar (AUD) reflects a mixed performance against its major currency peers, trading 0.5% higher to near 0.7150 against the US Dollar (USD) during the early North American session on Thursday. The outlook of the antipodean remains firm amid expectations that the Reserve Bank of Australia (RBA) will deliver more interest rate hikes during the year.

Market experts are of the view that the RBA will raise interest rates again in May as inflationary pressures in Australia have accelerated further.

On Wednesday, the Australian Bureau of Statistics reported that Q1 Consumer Price Index (CPI) growth was in line with estimates at 1.4%, significantly higher from 0.6% seen in the last quarter of 2025. On an annualized basis, the CPI data arrived higher at 4.1%, as expected, from the previous reading of 3.6%.

According to analysts at Westpac, “A May hike is locked in, and we hold to our base case that there will be two further rate hikes, in June and August," Reuters reported.

In the March policy meeting, the RBA raised its Official Cash Rate (OCR) by 25 basis points (bps) to 4.1% and the stated that inflationary pressures were already high before the spike in oil prices amid Middle East conflicts.

Meanwhile, the US Dollar underperforms its major peers even as the Federal Reserve (Fed) has stressed the need to hold interest rates at their current levels for longer amid global market uncertainty.

On Wednesday, Fed Chair Jerome Powell said in the press conference after leaving interest rates unchanged that the “current policy stance is appropriate,” warning that “Developments in the Middle East are contributing to uncertainty.”

On the economic data front, the US flash Q1 Gross Domestic Product (GDP) growth has arrived at 2% on an annualized basis, lower than estimates of 2.3%, but higher than the previous reading of 0.5%.

(This story was corrected at 12:55 GMT to say in the second bullet that the US Q1 GDP grows 2% YoY, not 2.3%)