AUD/USD tests 0.7140 as RBA elevates interest rates to 0.35%

• AUD/USD has jumped to near 0.7140 as the RBA has announced a rate hike by 25 bps.
• The announcement from RBA’s Lowe is above the forecast of 15 bps.
• The DXY has turned volatile as a rebound in the risk-on impulse declines safe-haven appeal.

The AUD/USD pair has attracted significant bids as the Reserve Bank of Australia (RBA) has raised its interest rates by 25 basis points (bps) to 0.35%. 

The announcement from RBA Governor Philip Lowe is with the expectations of the street. Market participants were expecting a rate hike by 15 basis points (bps) amid the higher Consumer Price Index (CPI) figure. Last week, the Australian Bureau of Statistics reported yearly Australian inflation at 5.1%, much higher than the forecast of 4.6% and the previous print of 3.5%.

In the last RBA’s monetary policy, Governor Philip Lowe dictated that the central bank is in no mood to step up the interest rates as the policymakers do not see any price pressures despite rising oil and other commodity prices. However, the recent print of Australian inflation created havoc in the sentiment of the market participants, and the think tanks in the economy polled for a rate hike by 15 bps to 0.25%.

Meanwhile, the US dollar index (DXY) is losing its less volatile aura in the Asian session as investors are confused about whether to stick with the asset for more gains and to deploy the ‘Buy on rumor and Sell on news’ indicator. The news portion of the indicator indicates the event of a rate hike by the Federal Reserve (Fed) on Wednesday. The DXY is establishing below 103.50 amid a rebound in the risk-on impulse.