AUD/USD Nosedives to 0.6500 After RBA Delivers Dovish Rate Cut

AUD/USD Slides as RBA Turns More Dovish

The Australian Dollar (AUD) took a significant hit on Tuesday, with the AUD/USD pair dropping over 0.3% to trade near 0.6500 during the European session. The decline comes in response to a 25 basis point rate cut by the Reserve Bank of Australia (RBA), which lowered its Official Cash Rate (OCR) to 3.6%, as widely anticipated by markets.

What spooked traders more than the cut itself was the dovish tone adopted by RBA Governor Michelle Bullock, who emphasized that monetary policy would remain expansionary going forward.

"Forecasts indicate that cash rates should be lower for price stability," Bullock said, leaving the door open for further easing. “Would not rule out back-to-back rate cuts,” she added.

The comments hint at the possibility of consecutive rate cuts, sparking broad weakness in the Aussie Dollar and boosting speculation that the RBA could be one of the first major central banks to fully pivot toward accommodative policy amid slowing growth and subdued inflation.

Markets Eye US CPI and Australian Jobs Data

The near-term direction for AUD/USD will likely hinge on two major macroeconomic events: the US Consumer Price Index (CPI) for July, due later today, and Australia’s labor market report, scheduled for Thursday.

Markets expect the US CPI to rise 2.8% YoY, potentially affecting Federal Reserve policy expectations and adding to volatility in USD crosses.

Meanwhile, Australian job creation is forecast at 25,000 for July, a strong rebound from June’s 2,000 figure. The Unemployment Rate is expected to hold steady at 4.3%.

If the labor market data surprises to the downside, it may further pressure the Aussie, reinforcing expectations of additional RBA cuts.