AUD/USD's ascent: How RBA's rate hike propelled it past 0.7000
AUD/USD soared last week, closing at 0.7013, a 0.72% gain, marking its third consecutive week of gains and the first weekly close above 0.7000 since January 2023. This surge occurred amidst a volatile week, with risk assets fluctuating sharply before a strong rebound.
The Australian dollar (AUD) demonstrated remarkable resilience, holding firm despite the turbulence. This resilience was further bolstered by the Reserve Bank of Australia's (RBA) first rate hike in over two years, adopting a hawkish tone that widened the interest rate differential in favor of the AUD.
Looking ahead, AUD/USD's trajectory will be influenced by key domestic data releases and market volatility. Westpac consumer confidence, National Australia Bank (NAB) business confidence, and speeches from RBA's Hauser and Hunter will be pivotal.
Westpac consumer confidence for January dipped 1.7% to 92.9, a three-month low, reflecting renewed RBA rate hike fears and surging mortgage rate expectations. However, modest gains in family finances and economic views partially offset these concerns.
The RBA's 25 basis point rate hike last week, coupled with a darkening inflation outlook, suggests further softening of sentiment towards the 90 mark. The Australian interest rate market anticipates a 25 basis point hike in March and a full 25 basis point hike in June.
AUD/USD technical analysis suggests a retest of the 0.7094 high, potentially extending to 0.7150-0.7200 if the RBA hikes rates multiple times this year. A clean break below 0.6800, however, could challenge the bull trend's strength, opening the door to a deeper pullback towards 0.6700.
