Australian Dollar gains ground after hawkish remarks from the RBA

Last Updated on 18/09/2026

• RBA Governor Michele Bullock signaled that stubborn inflation pressures could necessitate another interest rate increase later this month.
• UBS expects the RBA to deliver two more rate hikes, lifting the cash rate to a peak of 4.85%.
• Market participants now see a 53.1% chance of a Federal Reserve rate hike in October.

Australian Dollar gains momentum after hawkish RBA signals

AUD/USD advances for a second consecutive session, trading near 0.7120 during Friday’s Asian trading hours. The pair is supported by renewed strength in the Australian Dollar after Reserve Bank of Australia Governor Michele Bullock delivered a firm message on inflation.

During a parliamentary appearance, Bullock noted that inflation risks have evolved largely as anticipated and warned that persistent price pressures may require further policy tightening. Her comments strengthened expectations that the RBA could implement a fourth rate increase this year at its late-September meeting. Deputy Governor Andrew Hauser reiterated the central bank’s unwavering commitment to returning inflation to target. Meanwhile, UBS analysts now anticipate two additional rate hikes, projecting a terminal cash rate of 4.85%.

Despite the recent rebound, UOB Group remains cautious on the Australian Dollar over the medium term. The bank noted that it adopted a bearish stance on the currency last week when AUD/USD was trading around 0.7160 and initially targeted a decline toward 0.7120. After the pair fell below that level and touched 0.7109, UOB warned that further downside remained possible, although short-term conditions appeared oversold. With AUD/USD subsequently closing below 0.7100 at 0.7087, the bank now sees scope for a move toward 0.7050. According to UOB, only a sustained break above 0.7140 would suggest the currency is beginning to stabilize.

On the US side, the Federal Reserve increased interest rates by 25 basis points on Wednesday, marking its first tightening move since 2023. Fed Chair Kevin Warsh emphasized that inflation remains uncomfortably high and argued that recent data have not shown sufficient progress in reducing underlying price pressures. As a result, expectations for additional tightening have risen, with CME FedWatch data showing markets now assign a 53.1% probability of another Fed rate hike in October, compared with 44% the previous day.