Key points for AUD trend forecast: Is there still room for appreciation after the central bank's rate hike?

The Reserve Bank of Australia’s recent interest rate hike decision has attracted widespread market attention, making the AUD trend forecast a key focus for investors. After the rate hike announcement on February 3, the AUD/USD experienced a strong rebound, but can this rally continue? What will be the future policy direction of the central bank? These questions directly impact the medium-term trajectory of the Australian dollar.

Details of the RBA Rate Hike: Policy Shift Under Inflationary Pressure

On February 3, the Reserve Bank of Australia (RBA) announced a 25 basis point increase, raising the policy rate to 3.85%, in line with market expectations. The central bank committee stated in its statement that private sector demand has been stronger than expected, the labor market remains relatively tight, and inflation may remain above target levels in the foreseeable future.

RBA Governor Michele Bullock emphasized that current inflation momentum is too strong for the central bank to allow inflation to get out of control. Considering internal and external economic pressures, the committee did not provide clear guidance on future rate movements but said it will continue to monitor economic data changes. This wording also reflects the cautious attitude of the RBA toward inflation.

Post-Hike Surge: Market Reaction and Currency Peaks

Following the rate hike announcement, the AUD responded swiftly. The AUD/USD rose nearly 1%, successfully breaking through the 0.7 level. Meanwhile, the AUD/JPY soared to 109.35, reaching a new high since July 2024.

From a time perspective, the AUD has appreciated over 5% since early 2025, indicating a sustained upward trend. Analysts note that the AUD’s appreciation will help lower import prices, which can positively impact domestic inflation. The rate hike has not been fully priced in by the market, and investors reacted strongly to the hawkish stance of the RBA.

Future AUD Trend Forecast: Will There Be More Rate Hikes in 2026?

Market pricing suggests that the RBA is likely to raise rates again within 2026. Derivatives markets currently price in a next rate hike pushing the cash rate to 4.1%.

Abhijit Surya, Chief Analyst at Capital Economics, stated that the baseline expectation is for the RBA to raise rates by another 25 basis points, most likely in May. However, he also warned that since the RBA expects core inflation to remain below the 2-3% target range until early 2028, it may be forced to implement further rate hikes. This implies that Australia’s tightening cycle could last longer than the market anticipates.

Richard Franulovich, Head of FX Strategy at Westpac Banking Corporation, believes that hawkish signals from the rate hike will further strengthen the AUD against other major currencies. “The rate hike has not been fully priced in by the market, and the statement contained a clear hawkish bias. As market expectations for rate increases are re-priced, the AUD gains additional upward momentum.”

Based on these analyses, the key to the AUD’s outlook depends on the central bank’s assessment of inflation. If inflationary pressures persist, the RBA’s rate hike cycle will continue to support AUD appreciation; conversely, if inflation data shows a significant decline, the AUD’s upward momentum will weaken accordingly. Investors should closely monitor upcoming economic data, especially inflation indicators and employment figures, to better grasp the direction of the AUD trend forecast.