AUD Soars as Hawkish RBA Hikes to 3.85% in Outlier Move

The Australian Dollar (AUD/USD) surged nearly 1% to trade around 0.7090 on Monday after the Reserve Bank of Australia (RBA) defied the global pause struck by other central banks, lifting its cash rate to 3.85%.

Guidance Points Higher

Market participants were caught off-guard not just by the hike, but by the aggressive forward guidance. RBA policymakers revised their inflation and growth forecasts upward, explicitly assuming a rate trajectory that could see the cash rate peak at 4.2% by the end of 2026.

Economists at HSBC noted that the RBA's stance remains distinctly hawkish compared to the Federal Reserve and ECB. HSBC now projects another 25 basis point hike in the third quarter of 2026 to combat persistent price pressures.

Data Snapshot

• Cash Rate Hiked to 3.85% (RBA defies global pause).
• Peak Rate Forecast: 4.2% by end of 2026.
• AUD/USD Level: 0.7090 (+1% intraday).
• USD/CAD Level: 1.3560

Contrast with CAD

While the Aussie rallied, the Canadian Dollar (CAD) acted largely as a passenger to USD weakness. USD/CAD hovered near 1.3560, maintaining a broader bearish structure but lacking the idiosyncratic hawkish catalyst fueling the AUD. The divergence highlights a shifting landscape where central bank policy gaps are once again becoming the primary driver of FX distinctness.