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Market Insights > Daily Market Analysis New

Australian Dollar Holds Firm as RBA Hawkish Expectations Build on Inflation Pressures

Published: 4 May 2026,06:17

Daily Market Analysis New

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aussie
RBA

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Key Takeaways

Australian dollar supported by rising expectations of further RBA rate hikes
Markets price high probability of another 25bps increase
Inflation remains elevated, driven partly by energy prices
Strait of Hormuz disruption adds upside risk to inflation outlook

Market Summary

The Australian dollar remained supported, underpinned by growing expectations that the Reserve Bank of Australia will continue tightening monetary policy in response to persistent inflation pressures.

Market pricing suggests a strong likelihood of another rate hike, with economists widely expecting the central bank to raise its Official Cash Rate by 25 basis points to 4.35%. This would mark a third consecutive increase, reinforcing the RBA’s hawkish stance.

The tightening expectations have been driven by recent inflation data, which showed that Australia’s Consumer Price Index rose 4.6% year-on-year in March. While slightly below expectations, the reading remains significantly higher than the previous month’s 3.7%, indicating that price pressures are still building.

Inflation Pressures and “Hormuz Effect”

Rising energy costs linked to geopolitical tensions have become a key factor shaping the inflation outlook. The prolonged disruption around the Strait of Hormuz has pushed fuel prices higher, contributing to what some economists have described as a “Hormuz-driven” inflation shock.

This dynamic creates a challenging environment for policymakers. While higher interest rates are intended to control inflation, they do little to directly address supply-side shocks such as rising energy costs. As a result, households — particularly those with mortgages — are facing increased financial pressure from both higher borrowing costs and elevated living expenses.

Market Focus

Investors will closely monitor comments from Michele Bullock for further guidance on the policy outlook. Markets are particularly focused on how the RBA assesses the persistence of inflation, especially in the context of ongoing energy market disruptions.

Any signals regarding the trajectory of interest rates and inflation expectations will be critical in determining the near-term direction of the Australian dollar.

Overall, the Australian dollar remains supported by hawkish monetary policy expectations, although the sustainability of its strength will depend on how inflation evolves amid ongoing geopolitical and energy market uncertainties.

Technical Analysis

AUD/USD, H4:

AUD/USD is trading higher, currently testing the 0.7215 resistance level, which marks a recent high and key breakout zone.

Momentum is supportive, with the MACD strengthening and the RSI at 61 above the midline, indicating sustained bullish pressure.

A confirmed breakout above 0.7215 could extend gains toward the next resistance at 0.7315, reinforcing bullish continuation.

However, if momentum fades, the pair may retrace toward the 0.7115 support level, with further downside toward 0.7020 if selling pressure builds.

Resistance Levels: 0.7215, 0.7315
Support Levels: 0.7115, 0.7020

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