{"id":47505,"date":"2026-05-19T06:17:08","date_gmt":"2026-05-19T06:17:08","guid":{"rendered":"https:\/\/www.vtmarketsglobal.com\/en\/uncategorized\/47505\/"},"modified":"2026-05-19T06:17:08","modified_gmt":"2026-05-19T06:17:08","slug":"aud-usd-slips-as-rba-inflation-risk-builds","status":"publish","type":"post","link":"https:\/\/www.vtmarketsglobal.com\/en\/analysis\/47505\/","title":{"rendered":"AUD\/USD Slips as RBA Inflation Risk Builds"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/www.vtmarketsglobal.com\/en\/wp-content\/uploads\/sites\/6\/2026\/05\/1_Aussie4-1024x573.webp\" alt=\"\" class=\"wp-image-50516\"\/><\/figure>\n\n\n\n<p><strong>Key Points<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>AUD\/USD traded at <strong>0.71369<\/strong>, down <strong>0.00307<\/strong>, or <strong>0.43%<\/strong>, after reaching a session high of <strong>0.7163<\/strong>.<\/li>\n\n\n\n<li>RBA Assistant Governor Sarah Hunter warned that higher fuel costs could lift inflation expectations and force tighter policy.<\/li>\n\n\n\n<li>Australia\u2019s Westpac-Melbourne Institute Consumer Sentiment Index rose <strong>3.5% month-on-month<\/strong> in May to <strong>83<\/strong>, rebounding from April\u2019s <strong>2\u00bd-year low of 80.1<\/strong>.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-dots\"\/>\n\n\n\n<p>The Australian dollar slipped toward <strong>$0.71<\/strong> on Tuesday as traders cut exposure after the Reserve Bank of Australia sharpened its warning on inflation. AUD\/USD traded at <strong>0.71369<\/strong>, down <strong>0.00307<\/strong>, or <strong>0.43%<\/strong>, at <strong>05\/19 07:08:18 GMT+3<\/strong>. The session high stood at <strong>0.7163<\/strong>, with a low of <strong>0.71347<\/strong>, an open at <strong>0.71672<\/strong>, and a close at <strong>0.71676<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">The Australian dollar\u2019s rally may fade with the RBA set to signal a slower pace of interest rate hikes after a widely expected increase this week <a href=\"https:\/\/t.co\/4fhQ7RyZM4\">https:\/\/t.co\/4fhQ7RyZM4<\/a><\/p>&mdash; Bloomberg (@business) <a href=\"https:\/\/twitter.com\/business\/status\/2051072958638989444?ref_src=twsrc%5Etfw\">May 3, 2026<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>The move reversed gains from the previous session and showed how quickly the Aussie can lose support when inflation risk returns to the front. The currency had benefited from better risk appetite and firmer local data, but Sarah Hunter\u2019s remarks pushed attention back to the cost of the Middle East conflict.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">Oil is surging as the Iran conflict rattles global markets. On the latest Bloomberg Australia Podcast, we discuss what it means for petrol prices, the ASX and the RBA. <a href=\"https:\/\/t.co\/wNjK0QfUFK\">https:\/\/t.co\/wNjK0QfUFK<\/a><\/p>&mdash; Bloomberg (@business) <a href=\"https:\/\/twitter.com\/business\/status\/2029036384061632584?ref_src=twsrc%5Etfw\">March 4, 2026<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>Hunter said the RBA is watching how the Iran conflict feeds into domestic inflation. The central bank sees the Middle East conflict as an external shock that is lifting global oil and natural gas costs, with direct and indirect effects on Australian prices. Australian petrol prices rose by <strong>36%<\/strong> at their peak, while diesel rose even more and remains well above pre-conflict levels.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">RBA Focuses On Inflation Expectations<\/h2>\n\n\n\n<p>The RBA\u2019s message is clear: fuel shocks can become more dangerous when inflation is already above target. Hunter said Australia entered the conflict with inflation still above the <strong>2% to 3%<\/strong> target band and with domestic cost pressures already active. That gives oil-driven price increases more room to pass into retail prices, transport costs, construction inputs, groceries, travel, and imported goods.<\/p>\n\n\n\n<p>The central bank now sees headline inflation peaking at <strong>4.8%<\/strong> in the June quarter. Its underlying inflation forecast was also revised higher in the near term, with the oil shock expected to add around <strong>0.4 percentage points<\/strong> to underlying inflation in the March quarter of <strong>2027<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">The risk of inflation expectations in Australia drifting higher is \u201celevated, \u201d a senior Reserve Bank official said, warning that if they were to become untethered a sharp economic slowdown may be needed to lower them <a href=\"https:\/\/t.co\/AWrGAsrVIJ\">https:\/\/t.co\/AWrGAsrVIJ<\/a><\/p>&mdash; Bloomberg (@business) <a href=\"https:\/\/twitter.com\/business\/status\/2056526365973700758?ref_src=twsrc%5Etfw\">May 19, 2026<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>The policy risk sits in expectations. If households and firms expect high inflation to persist, they change wage demands, contracts, and pricing behaviour. Hunter said higher fuel prices could lift and embed inflation expectations, which would make the inflation shock harder to reverse.<\/p>\n\n\n\n<p>That warning puts AUD\/USD in a difficult position. Higher rates can support the Aussie through yield. But if tighter policy comes with slower growth, weaker household spending, and lower business investment, traders may treat the currency as a growth-risk trade rather than a rate-support trade.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">May Rate Hike Gives the RBA Room to Wait<\/h2>\n\n\n\n<p>Minutes from the RBA\u2019s May meeting showed the board discussed either holding rates steady or raising by <strong>25 basis points<\/strong> to <strong>4.35%<\/strong>. The hike fully reversed the policy easing made in <strong>2025<\/strong>. Eight of the nine board members judged the case for a hike was stronger, as inflation risks had risen while the Middle East conflict dragged on.<\/p>\n\n\n\n<p>The board judged financial conditions would probably be somewhat restrictive after the decision. That gives policymakers space to watch how households and businesses respond to the Iran war, higher fuel costs, and tighter borrowing conditions. Markets are still wagering on another hike in <strong>August<\/strong>, with that move about <strong>75%<\/strong> priced in. Rates are seen peaking at <strong>4.60%<\/strong>, with some chance of reaching <strong>4.85%<\/strong>.<\/p>\n\n\n\n<p>This leaves the Aussie exposed to two opposing forces. More rate-hike pricing can support AUD\/USD if global risk appetite holds firm. A weaker growth outlook can pull the pair lower if consumers start cutting spending or if oil keeps pressure on household budgets.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Consumer Sentiment Recovers, But Stays Weak<\/h2>\n\n\n\n<p>Australia\u2019s consumer sentiment improved in May, but the rebound did not signal a healthy consumer backdrop. The Westpac-Melbourne Institute Consumer Sentiment Index rose <strong>3.5%<\/strong> to <strong>83<\/strong> from <strong>80.1<\/strong> in April, when the index had slumped <strong>12.5%<\/strong> to its lowest level in more than two years. A reading below <strong>100<\/strong> shows pessimists still outnumber optimists.<\/p>\n\n\n\n<p>The improvement came partly from the government\u2019s temporary halving of the fuel excise tax, which helped reduce average pump prices by nearly <strong>30\u00a2 per litre<\/strong> since April. That gave households some relief after earlier interest rate hikes and the fuel shock.<\/p>\n\n\n\n<p>The details still look fragile. Family finance assessments recovered, but economic expectations weakened. The \u201ceconomy, next 12 months\u201d sub-index fell <strong>1.5%<\/strong> to <strong>74.2<\/strong>, while the \u201ceconomy, next 5 years\u201d index dropped <strong>2.2%<\/strong> to <strong>89.3<\/strong>. Westpac said the combined reading was the weakest since <strong>November 2022<\/strong>.<\/p>\n\n\n\n<p>Mortgage pressure also remains high. The Mortgage Rate Expectations Index rose <strong>2.3%<\/strong> to <strong>181.2<\/strong>, a fresh <strong>three-year high<\/strong>. Even after three hikes this year, <strong>85%<\/strong> of consumers still expect mortgage rates to rise over the next <strong>12 months<\/strong>, with expectations closer to <strong>90%<\/strong> among mortgage holders.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Technical Analysis<\/h2>\n\n\n\n<p>AUDUSD is trading near <strong>0.7137<\/strong>, pulling back after failing to sustain momentum above the recent high around <strong>0.7277<\/strong>. The pair had been building a constructive recovery through April and early May, but the latest decline has pushed price back below key short-term moving averages, signalling a loss of upside momentum.<\/p>\n\n\n\n<p>Technically, the structure is shifting from bullish to <strong>neutral-to-bearish in the short term<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>MA5:<\/strong> 0.7185<\/li>\n\n\n\n<li><strong>MA10:<\/strong> 0.7210<\/li>\n\n\n\n<li><strong>MA20:<\/strong> 0.7187<\/li>\n<\/ul>\n\n\n\n<p>Price is now trading below all three averages, while the shorter averages are beginning to roll over. This suggests sellers have regained near-term control after the failed breakout attempt above <strong>0.7270<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/www.vtmarketsglobal.com\/en\/wp-content\/uploads\/sites\/6\/2026\/05\/image-24-1024x501.jpg\" alt=\"\" class=\"wp-image-50514\"\/><\/figure>\n\n\n\n<p>Key levels to watch:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Immediate support:<\/strong> 0.7135 \u2192 0.7000<\/li>\n\n\n\n<li><strong>Major support:<\/strong> 0.6930<\/li>\n\n\n\n<li><strong>Resistance:<\/strong> 0.7185 \u2192 0.7210 \u2192 0.7277<\/li>\n<\/ul>\n\n\n\n<p>The <strong>0.7135 area<\/strong> is now the first support to watch. A break below this region could expose the <strong>0.7000 psychological level<\/strong>, especially if the US dollar continues to stabilise.<\/p>\n\n\n\n<p>On the upside, AUDUSD needs to reclaim <strong>0.7185\u20130.7210<\/strong> to ease downside pressure. Without that move, rallies may remain vulnerable to selling.<\/p>\n\n\n\n<p>Overall, AUDUSD remains in a broader recovery structure, but short-term momentum has weakened. The pair now needs to defend <strong>0.7135<\/strong> to avoid a deeper corrective pullback.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Cautious Forecast<\/h2>\n\n\n\n<p>AUD\/USD may stay under pressure while it trades below <strong>0.71879<\/strong> and <strong>0.72100<\/strong>. A break below <strong>0.71347<\/strong> would strengthen the downside setup and could pull the pair toward <strong>0.69390<\/strong>, especially if oil prices stay high and RBA warnings keep growth concerns active.<\/p>\n\n\n\n<p>A recovery above <strong>0.72100<\/strong> would show buyers are returning and could bring <strong>0.7277<\/strong> back into view. The strongest rebound path needs three signals to align: fuel-price pressure cools, consumer sentiment improves beyond <strong>83<\/strong>, and RBA rate-hike expectations support the Aussie without triggering deeper concern over slower growth.<\/p>\n\n\n\n<p><strong>Learn more about trading <a href=\"https:\/\/www.vtmarkets.com\/forex\/\" target=\"_blank\" rel=\"noreferrer noopener\">Forex Pairs<\/a> on VT Markets <a href=\"https:\/\/www.vtmarkets.com\/Insights\/\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a>.<\/strong><\/p>\n\n\n\n<details class=\"wp-block-details is-layout-flow wp-block-details-is-layout-flow\"><summary><strong>Trader Questions<\/strong><\/summary>\n<p><strong>Why Is AUD\/USD Falling Today?<\/strong><\/p>\n\n\n\n<p>AUD\/USD is falling after the Reserve Bank of Australia warned that the Middle East conflict could lift inflation pressure and weaken economic growth.<\/p>\n\n\n\n<p>AUD\/USD traded at <strong>0.71369<\/strong>, down <strong>0.00307<\/strong>, or <strong>0.43%<\/strong>, after reaching a session high of <strong>0.7163<\/strong>.<\/p>\n\n\n\n<p><strong>What Is The Current AUD\/USD Price?<\/strong><\/p>\n\n\n\n<p>AUD\/USD traded at <strong>0.71369<\/strong>.<\/p>\n\n\n\n<p>The session high stood at <strong>0.7163<\/strong>, with a low of <strong>0.71347<\/strong>, an open at <strong>0.71672<\/strong>, and a close at <strong>0.71676<\/strong>.<\/p>\n\n\n\n<p><strong>Why Did The Australian Dollar Reverse Earlier Gains?<\/strong><\/p>\n\n\n\n<p>The Australian dollar reversed earlier gains after RBA Assistant Governor Sarah Hunter warned that higher inflation expectations could create a risk for the economy.<\/p>\n\n\n\n<p>Her comments shifted attention back to energy prices, the Iran war, and the risk that inflation stays above the RBA\u2019s target for longer.<\/p>\n\n\n\n<p><strong>How Is The Middle East Conflict Affecting AUD\/USD?<\/strong><\/p>\n\n\n\n<p>The Middle East conflict is affecting AUD\/USD through energy prices and inflation expectations.<\/p>\n\n\n\n<p>Higher oil and fuel costs can raise transport, food, freight, and business costs. That can weaken household spending and pressure economic growth, even if higher rate expectations support the currency for a time.<\/p>\n\n\n\n<p><strong>What Did The RBA Say About Inflation?<\/strong><\/p>\n\n\n\n<p>The RBA warned that persistently higher inflation expectations pose a risk to the economy.<\/p>\n\n\n\n<p>Sarah Hunter said policymakers are focused on stopping inflation expectations from becoming entrenched above target. If expectations stay too high, the RBA may need tighter policy, which could slow activity more sharply.<\/p>\n<\/details>\n\n\n\n<p><\/p>\n\n<p>\r\n\r\n<p><strong>Start trading now &#8211; Click <a href=\"https:\/\/www.vtmarketsglobal.com\/en\/trade-now\/\">here<\/a> to create your real VT Markets account <\/strong> <\/p>\r\n<!-- \/wp:post-content -->","protected":false},"excerpt":{"rendered":"<p>AUD\/USD slips as RBA inflation warnings, fuel costs and consumer sentiment shape the next Aussie move.<\/p>\n","protected":false},"author":38,"featured_media":47502,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-47505","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis"],"acf":[],"aioseo_notices":[],"featured_image_src":"https:\/\/www.vtmarketsglobal.com\/en\/wp-content\/uploads\/sites\/6\/2026\/05\/Aussie4-600x400.webp","featured_image_src_square":"https:\/\/www.vtmarketsglobal.com\/en\/wp-content\/uploads\/sites\/6\/2026\/05\/Aussie4-600x600.webp","author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/47505","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=47505"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/47505\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media\/47502"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=47505"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=47505"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=47505"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}