Anna 
The Australian Dollar (AUD) experienced a significant decline following the Reserve Bank of Australia (RBA)’s decision to maintain its interest rate at 4.35% on Tuesday. Investor sentiment shifted towards a potentially more hawkish stance from the RBA, especially after last week’s inflation data exceeded expectations. However, the RBA acknowledged a recent slowdown in progress towards curbing inflation, maintaining a cautious forward guidance.
In March, Australian monthly inflation surged unexpectedly, contrasting with market forecasts of stagnation. RBA Governor Michele Bullock emphasized the importance of remaining vigilant regarding inflation risks and expressed confidence that current interest rates are appropriately positioned to guide inflation back within the target range of 2-3% by the second half of 2025 and toward the midpoint by 2026.
Meanwhile, the US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against six major currencies, advanced on expectations of the Federal Reserve (Fed) maintaining higher interest rates for an extended period. Additionally, hawkish remarks from Minneapolis Fed President Neel Kashkari further boosted the US Dollar, contributing to the depreciation of the AUD/USD pair.
President Kashkari indicated that the prevailing expectation is for rates to remain unchanged for a significant period. Although the probability of rate hikes is low, it remains a possibility, according to a Reuters report.
