Westpac Sees RBA Hold in June, But More Hikes Ahead for AUDUSD

Westpac Maintains RBA Rate Path, Trims Inflation Forecasts

Australia’s Westpac has reaffirmed its expectation that the Reserve Bank of Australia (RBA) will hold the cash rate steady at its June 15-16 meeting, pausing after three consecutive hikes. The move aligns with recent mixed inflation and labor market data, providing policymakers room to assess soft consumer and housing trends against persistent price pressures.

The bank revised its headline inflation peak forecast to 4.7% from 5.0%, citing lower oil, petrol, and diesel prices. Trimmed mean inflation was also adjusted downward to 3.8% year-on-year from 4.0%, though Westpac noted ongoing pass-through effects from fuel costs and a stronger-than-expected rise in award wages. Despite the downgrades, inflation is still projected to run above the RBA’s 2.5% target, supporting the case for further tightening.

Conditional Hikes Signal Caution for AUDUSD Traders

Westpac retains its base case for additional hikes in August and September, consistent with the RBA’s mandate to curb inflation. However, the bank emphasized downside risks to its outlook, stating a more extended pause or a smaller tightening cycle—zero or one further hike rather than three—is more probable. This cautious framing suggests markets should treat the August/September calls as conditional, with upcoming economic data acting as key catalysts.

For AUDUSD traders, the RBA’s policy trajectory remains a critical driver. A June hold could ease near-term selling pressure on the Australian dollar, but lingering inflation concerns and potential hikes later in the year may cap upside. Technical indicators show AUDUSD consolidating near multi-week lows, with 0.6600 and 0.6700 acting as immediate resistance levels.

Risk Sentiment and Yield Dynamics

Global risk sentiment remains fragile amid sticky inflation and tighter monetary policies worldwide. The RBA’s pause could provide temporary relief to risk assets, but bond yields in Australia may stay elevated if markets price in future hikes. The 10-year Australian Government bond yield has stabilized around 4.2%, reflecting cautious optimism about inflation moderation.

Traders will monitor U.S. CPI, employment figures, and RBA Governor Philip Lowe’s speeches for directional cues. A softer-than-expected inflation print could delay tightening, while resilient wage growth may reinforce the case for aggressive action.

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