Australian Dollar Faces Limited Upside Amid RBA Rate Decision

On February 2, Francesco Pesole from ING Bank highlighted in a report that the Australian dollar's potential for appreciation could be constrained if the Reserve Bank of Australia (RBA) raises interest rates on Tuesday but downplays the likelihood of further hikes. According to Jin10, Pesole noted that despite higher-than-expected inflation in December and a booming real estate market providing justification for a rate increase, the RBA should avoid signaling the start of a new tightening cycle. The market currently anticipates at least one more rate hike by the end of the year. However, if the RBA indicates that this move is a 'one-off' action, it may limit the supportive effect of the rate hike on the Australian dollar.