Why is the Australian Dollar weakening to near 0.7000 despite the RBA’s hawkish stance?

• Selling pressure takes AUD/USD towards 0.7015 in early Asian trading on Thursday.
• Another RBA rate hike could come as early as November, with Hauser saying the inflation outlook is materially worse than the bank had projected.
• The direction of the Fed’s next policy moves remains a key market driver.

Risk aversion and safe-haven inflows lend some support to the US Dollar (USD) against the Australian Dollar (AUD), pushing AUD/USD down towards 0.7015 in Thursday’s early Asian trading. Market participants now await the weekly US Initial Jobless Claims figures, scheduled for release later on Thursday.

A fresh escalation in Tehran’s warnings came as an Iranian official threatened to target US political figures should American strikes resume, Fars News reported. Separately, the Saudi-led coalition announced early Wednesday that it had intercepted and destroyed five drones launched towards Saudi Arabia. With tensions in the Middle East persisting, demand for safe-haven currencies such as the Greenback could strengthen, weighing on the pair.

Expectations of a Reserve Bank of Australia (RBA) rate increase have strengthened among Aussie traders following Andrew Hauser’s comments. Speaking on Wednesday, RBA monetary policy board member Hauser cautioned that the inflation outlook for the coming months was “materially worse”. His warning described the outlook for inflation in the months ahead as “materially worse”.

According to the Guardian, the implied likelihood of a rate hike at the November policy meeting rose to 45%, compared with 30% before Hauser spoke. Such a move would mark the fifth increase this year, taking the Official Cash Rate target (OCR) from the current 4.6% to 4.85%, its highest since the global financial crisis.

Could Hausner’s “materially worse” inflation outlook bring another RBA hike?

Following hawkish comments by RBA Deputy Governor Andrew Hausner, Australia’s interest rate market has adjusted “to price in a higher probability of another RBA rate hike before the end of this year”, MUFG analysts observe. Comparing the inflation outlook with the RBA’s August projections, Hausner described it as “materially worse”. He pointed out that “we’re seeing higher AI prices, tech prices feeding through into CPI…and we’re having a boom in data centre construction here in Australia as well, so that’s upside too, and then on domestic capacity pressure”.

Another concern raised by Hausner, MUFG highlights, was that “inflation has been high for a very long time now, and we are beginning to see some signs that people in the community are not sure if we’re going to bring inflation back to target, or certainly not for an extended period”. The bank says the hawkish remarks have consequently prompted market participants to factor in “closer to a 50:50 probability of another RBA hike next month”.

What do Warsh’s investment and AI views signal as Fed policy options stay open?

A cautious but moderately constructive tone marked Fed Chair Warsh’s remarks. At 5.6/10, the FXS Speechtracker score was below its historical average of 6.1/10, pointing to somewhat weaker conviction than the established baseline. Warsh’s acknowledgement of being “over-scarred from the Global Financial Crisis” highlights an enduring aversion to risk. At the same time, he pointed to a structural surge in growth and investment underpinned by “good policies”, while declining to commit in advance to decisions in October and December. His focus on AI as both a short-term demand shock and a future aid to confidence in data indicates that the Fed is embracing technological tailwinds without overlooking uncertain effects on the labour market or possible financial stability risks.

Despite the slightly weaker FXS Speechtracker reading, the FXS Fed Sentiment Index continued to indicate a firmly hawkish position: it moved 0.00 points, remaining at an elevated 127.51. That high reading, alongside forward guidance that avoids firm commitments, suggests markets still expect a restrictive Fed reaction function. By stressing output, employment, inflation and tail risks, Warsh reinforced a preference for keeping policy tight rather than signalling a near-term pivot.

Technical Analysis: Can AUD/USD break above the 100-day SMA?

A neutral near-term outlook persists on the daily AUD/USD chart as the pair fluctuates around the 0.70 mark. Trading just beneath both the 100-day simple moving average (SMA) and the upper Bollinger band, the pair faces tentative limits on further gains, while the Bollinger midline provides support nearby. With the Relative Strength Index (14) close to 51, momentum appears modestly positive but lacks conviction.

For buyers to extend the advance, AUD/USD would need to overcome a narrow supply zone: immediate resistance at the 100-day SMA of 0.7035, closely followed by the upper Bollinger band, also at 0.7035. If the pair weakens, the middle Bollinger band near 0.6975 offers the first support. Renewed selling would bring the lower band around 0.6915 into focus as a firmer floor.

(The technical analysis of this story was written with the help of an AI tool. Know more.)