AUD/USD into the RBA: a 4.60% hike is largely priced, yet the Aussie stays near its lows

AUD/USD heads into the Reserve Bank of Australia meeting with a useful paradox for traders: a rate hike is almost fully priced, yet the Australian dollar remains weak. Reuters put AUD/USD around 0,7011 today, while the RBA is due tomorrow, September 29, with a possible 25 basis-point increase from 4,35% to 4,60%.

That makes this meeting different from the simple “rate hike = stronger currency” template. When markets have already absorbed much of the decision, the reaction can depend more on what changes in expectations for the meetings that follow.

Four data points to separate

The RBA confirms on its website that the cash rate is 4,35% and that the next update is due on September 29. Reuters says markets expect a 25 basis-point hike to 4,60%.

Why Australian jobs complicate the picture

The ABS recorded an August employment increase of 39.500 people, but unemployment rose to 4,6% and participation to 67,1%. Employment growth came from part-time work: full-time employment fell by 6.300, while part-time employment rose by 45.800.

The message is therefore not simply “strong jobs” or “weak jobs”. It is a labour market that is gradually loosening while inflation remains a concern for the central bank.

The real driver: what happens after the hike

Governor Michele Bullock has said upside inflation risks may be materialising, pointing to high energy prices and still-strong domestic demand. Reuters reported core inflation at 3,6%, above the RBA’s 2-3% target.

For AUD/USD, the most important information will therefore not be the rate level alone. It will be the RBA’s language and the implied path:

• if the hike comes with another restrictive message, markets will reassess how much further tightening remains possible;
• if the hike looks closer to a pause, some of the hawkish premium already priced can fade;
• if the RBA surprises by holding rates unchanged, the repricing could be larger because expectations are currently aggressive.

These are scenarios, not forecasts.

Why the US dollar still matters

AUD/USD is not only an Australian story. The US dollar is near a two-month high today as oil and Treasury yields keep Fed tightening expectations elevated. That can limit the Aussie’s response even if the RBA remains restrictive.

The same cross-asset logic applies to other commodity currencies: in our analysis of USD/CAD and the yield spread, we showed why one correlation is not enough when rates and the dollar pull the other way.

What to watch after the decision

To separate a genuine regime shift from the first market reaction, track four elements: the decision, the statement, the Australian rates curve and whether the AUD/USD move holds. An expected hike that fails to strengthen the currency is not necessarily an anomaly; it can mean the market was already looking beyond the current meeting.

Educational and informational content based on verifiable public sources. This is not financial advice.