The Australian Dollar is trading higher against its major currency peers, with the exception of the Japanese Yen, on Wednesday, recording a 0.16% gain at around 0.7230 against the US Dollar during the European session.
RBA Policy Stance and Hauser's Remarks
The antipodean gains were driven by remarks from Reserve Bank of Australia Deputy Governor Andrew Hauser in an interview with the ABC, where she stressed the critical need to bring inflation down. Hauser noted that people are frustrated with rising prices, which disproportionately impact lower-income earners and disrupt price signals.
Rabobank noted that this hawkish speech has led markets to anticipate potential rate hikes as early as this month and in November. This tightening trajectory aligns closely with broader policy preferences aimed at cooling non-housing economic sectors.
US Dollar Pressure and Upcoming Data
Meanwhile, the US Dollar remains under pressure as investors look ahead to the release of United States Consumer Price Index data on Friday. During the Asian session, AUD/USD extended its consolidative price action above 0.7200, remaining largely unfazed by hot Chinese inflation data.
Technical Levels and Outlook
On the downside, the 20-day EMA at 0.7158 acts as the primary notable support level, and a daily close below it would signal a deeper corrective phase. On the upside, the currency pair is projected to extend its advance toward the four-year high near 0.7277.
Role of the Reserve Bank of Australia
The Reserve Bank of Australia manages the nation's monetary policy through governance meetings held eleven times a year. Its primary mandate is maintaining price stability, targeting an inflation rate of 2-3%, alongside supporting currency stability, full employment, and overall economic prosperity.
Monetary Policy Tools
During extreme economic conditions, the RBA utilizes Quantitative Easing by purchasing bonds from financial institutions to inject liquidity, which typically weakens the domestic currency. Conversely, Quantitative Tightening is applied when recovery is underway and inflation rises, halting asset purchases to support the currency.
