RBA minutes hawkish, Australian dollar steady

[Ben Graham]

The Australian dollar has edged higher on Tuesday. In the European session, AUD/USD is trading at 0.6528, up 0.06%.

RBA minutes: need more data before lower rates

The RBA shocked the markets earlier this month when it maintained the benchmark rate at 3.85%. The money markets had widely expected the Reserve Bank to trim rates by a quarter-point for a second successive meeting, especially after the trim mean, a key core CPI measure, fell to 3.5 year low of 2.4% in May. However, the RBA had a surprise up its sleeve by not making a move.

The minutes noted that the majority of the board wanted to review more economic data, including the all-important quarterly inflation report in order to confirm that inflation was heading lower. The RBA also said there were additional reasons not to cut, including stronger domestic demand and the labor market proving more resilient than anticipated.

The minutes acknowledged that the rate decision was completely unexpected, noting that there had been previous occasions when the markets had been "very confident" about a decision, only to have the central bank act in a different manner.

So what's next for the Reserve Bank? Last week's employment report was much softer than expected, with the economy producing only two thousand jobs and the unemployment rate jumping to 4.3% from 4.1%. The money markets have now priced in an August rate cut at around 90%.

Will the Fed cut rates in September?

The Federal Reserve is expected to continue its wait-and-see stance and maintain the benchmark rate at its meeting on July 30, despite increasing pressure from President Trump to ease policy. The money markets have priced in a hold at 97%, according to CME's Fedwatch. Things get interesting in September, with a 58% chance of a rate cut. The Fed is expected to lower rates at least once before the end of the year, but much will depend on inflation and whether tariffs are replaced by trade agreements.

AUD/USD Technical

• There is resistance at 0.6533 and 0.6541
• 0.6514 and 0.6503 are the next support levels

AUD/USD 1-Day Chart, July 22, 2025

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