Australian Dollar sticks to post-RBA losses; struggles near two-week low despite weak USD

AUD/USD attracts sellers for the second straight day after the RBA’s widely expected 25 bps rate hike.
The 6-3 vote split and the gloomy economic outlook exert heavy downward pressure on the Aussie.
Iran diplomacy hopes weigh on the USD ahead of US elections, though it fails to support spot prices.

The AUD/USD pair sticks to the Reserve Bank of Australia (RBA)-inspired losses, trading near the 0.6980-0.6975 region, down around 0.15% for the day, during the second half of the Asian session on Tuesday.

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As was widely expected, the RBA increased the official cash rate for the fifth time this year, by 25 basis points (bps) to 4.85%, or the highest level since November 2008, at the end of the November policy meeting. The decision, however, was far from unanimous, with three members preferring to hold rates at 4.60%. Moreover, the central bank's ugly economic outlook exerted pressure on the Australian Dollar (AUD), pushing it lower for the second straight day – also marking its third day of a negative move in the previous four.

The RBA now expects inflation not to return to the 2–3% target range until late 2027 – around three quarters later than previously projected. The GDP growth, meanwhile, is tipped to remain subdued and below trend as restrictive financial conditions weigh on activity. Adding to this, the unemployment rate is projected to drift higher, reaching around 5.1% by late 2028. This, to a larger extent, offsets a softer US Dollar (USD) and backs the case for a further near-term depreciating move for the AUD/USD pair.

As investors digest Monday's upbeat US ISM Manufacturing PMI, hopes of Iran diplomacy keep the safe-haven Greenback depressed. In fact, US President Donald Trump said on Monday that Iran wants to make a deal to end the war and that such an agreement could happen. Adding to this, Iran’s President Masoud Pezeshkian said that Tehran is seeking to resolve problems through dialogue. Traders, however, are showing a widespread hesitancy ahead of US midterm elections that will decide control of Congress.

Prediction markets strongly favor Democrats winning control of both the House of Representatives and the Senate, while a Republican sweep would be a larger market surprise. Nevertheless, the outcome should infuse some volatility in the market, providing some impetus to the USD and the AUD/USD pair. The focus, however, will be on the US Nonfarm Payrolls (NFP) report on Friday. Meanwhile, US JOLTS Job Openings might produce some short-term opportunities later during the North American session.

Australian Dollar Price This week

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.33%	-0.20%	0.22%	0.00%	0.72%	0.06%	-0.70%
EUR	0.33%		0.11%	0.49%	0.31%	0.97%	0.36%	-0.39%
GBP	0.20%	-0.11%		0.25%	0.22%	0.87%	0.25%	-0.50%
JPY	-0.22%	-0.49%	-0.25%		-0.18%	0.50%	-0.23%	-1.00%
CAD	-0.00%	-0.31%	-0.22%	0.18%		0.70%	-0.05%	-0.71%
AUD	-0.72%	-0.97%	-0.87%	-0.50%	-0.70%		-0.60%	-1.35%
NZD	-0.06%	-0.36%	-0.25%	0.23%	0.05%	0.60%		-0.81%
CHF	0.70%	0.39%	0.50%	1.00%	0.71%	1.35%	0.81%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

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