Daily Currency Update

The Australian dollar advanced through Tuesday after the RBA surprised markets, refusing to lower the underlying cash rate. Coming into Tuesday’s session, the AUD tested a break below US$0.6490 amid growing tariff uncertainty, tracking a narrow range through the first half of the domestic session. Markets had fully priced a 25-point rate adjustment and were left scrambling when the board elected to leave rates at 3.85%. The AUD lurched upward in the moments following the decision, climbing back toward US$0.6550. Attentions then turned to RBA Governor Bullock and the accompanying press conference as analysts looked for guidance on future policy moves and potential domestic bond performance. Governor Bullock highlighted that the decision to hold was not made as part of an underlying fundamental shift back toward a neutral policy setting, rather it was an issue of timing. The Board maintains an easing bias, but with broader economic conditions little changed since the last meeting in May, members felt it prudent to wait for more information. The objective being to ensure inflation is on track to sustainably hold below 3%, nearer the Bank’s 2.5% target. Having touched intraday highs at US$0.6547, the AUD edged lower overnight as markets reacted to more tariff uncertainty. President Trump announced plans to issue a 50% tariff on copper exports to the US, while indicating a “very, very high tariff, like 200%” will be issued on pharmaceuticals. These sectorial tariffs are separate to the “Liberation Day” country level tariffs and could create even more uncertainty among investors trying to judge the impact of Trump’s protectionist policies. The AUD opens this morning buying US$0.6520.

Our attention today turns to the RBNZ policy meeting and FOMC June meeting minutes, while tariff headlines drive underlying sentiment.