AUD/USD tumbles below 0.7000 as RBA announces a rate hike by 50 bps

• AUD/USD has surrendered the crucial support of 0.7000 on the 50 bps rate hike announcement by the RBA.
• The RBA has elevated its OCR by 50 bps to 1.85%.
• The lower consensus for US NFP is responsible for the vulnerable performance by the DXY.

The AUD/USD pair has slipped below the psychological support of 0.7000 swiftly as the Reserve Bank of Australia (RBA) announced an interest rate hike. RBA Governor Philip Lowe has elevated its Official Cash Rate (OCR) by 50 basis points (bps). After the rate hike announcement, RBA’s OCR stands at 1.85%.

The decision has remained in line with the market expectations. Price pressures are heating in the Australian economy due to volatile oil and food products. Last week, the Australian Bureau of Statistics reported the inflation rate for the second quarter of CY2022 at 6.1%, higher by 100 bps than the first quarter’s print. To contain the roaring inflation, tightening policy measures were highly required by the RBA.

It is worth noting that the Australian economy generated 88.4k jobs in June, significantly higher than the consensus and the prior print, which bolstered the RBA to feature a rate hike unhesitatingly.

Meanwhile, the US dollar index (DXY) has turned sideways after refreshing its three-week low at 105.05 in the Asian session. The DXY is performing vulnerable ahead of the US Nonfarm Payrolls (NFP) data.  As per the preliminary estimates, the US economy created 250k jobs in July, lower than the prior release of 372k. Soaring interest rates and a halt in the recruitment process by big tech firms have trimmed job opportunities.