AUD/USD Soars to 3-Year High on Hawkish RBA Signals

The AUD/USD pair has reached a three-year high, trading above 0.71, driven by a consistently hawkish stance from the Reserve Bank of Australia (RBA). The RBA recently increased the cash rate to 3.85%, and comments from Deputy Governor Andrew Hauser emphasize a commitment to curbing persistent inflation, even if it means further rate hikes. Markets are currently pricing in a roughly 70% probability of another 25 basis point increase in May. Strong domestic housing demand, evidenced by rising first-home buyer and investor loan growth, further supports the RBA’s tightening policy. While US economic data presents a mixed picture – with softer labour costs potentially signaling a dovish shift from the Federal Reserve – strong US Non-Farm Payrolls data has recently boosted the AUD/USD. Investors are now awaiting Australian Consumer Inflation Expectations and the US CPI report for further direction. Concerns remain that Australia’s economy may be particularly sensitive to demand shocks, potentially increasing inflation vulnerability. The New Zealand Dollar is also gaining momentum, though influenced by the more cautious approach of the RBNZ.