Monthly Wrap: AUD – Australian dollar supported by hawkish RBA bets 

Key takeaways:  

• Hawkish RBA bets underpin AUD 
• Global inflation concerns keep ‘Aussie’ in flux  
• AUD monthly lows: £0.51, €0.60, $0.64, NZ$1.07, C$0.89  
• AUD monthly highs: £0.52, €0.61, $0.67, NZ$1.10, C$0.91  

The Australian dollar (AUD) began May on the back foot, in the wake of the latest interest rate decision from the Reserve Bank of Australia (RBA). As expected, the RBA left rates unchanged, but also signalled that its hiking cycle was over.  

The ‘Aussie’ remained on the defensive in the wake of the latest business sentiment index. The National Australia Bank found that confidence remained muted in April.  

Rising unemployment weakened the AUD in the middle of May. In April, the unemployment rate rose to 4.1%, up from 3.9% in March, pointing to a growing slack in the labour market. 

Hawkish meeting minutes from the RBA supported the ‘Aussie’ towards the end of May. The minutes revealed that the central bank considered hiking interest rates during its most recent meeting. 

Risk appetite also played a role in shaping the Australian dollar last month. Concerns over the global inflation outlook and suggestions that the Federal Reserve may hike rates again kept the market mood in flux, rocking the AUD. 

Looking at the month ahead, Australia’s latest GDP data for the first quarter of 2024 will be the primary focus for investors. 

Markets are anticipating a 0.2% expansion in the Australian economy, which could lift AUD exchange rates.

RBA interest rate speculation could continue to influence the ‘Aussie’. The central bank is expected to leave interest rates unchanged once again in June, but hawkish forward guidance could support the currency.  

Meanwhile, risk appetite is likely to continue infusing the currency with volatility. With global inflation appearing more persistent than expected, jitters around high interest rates may keep the currency on its toes.