AUD/USD recovers after declining below 0.6800, RBA hikes rates by 50 bps fourth time

• AUD/USD has recovered from 0.6790 on the 50 bps rate hike announcement by the RBA.
• A fourth consecutive half-a-percent rate hike has pushed the OCR to 2.35%.
• The DXY is expected to remain volatile ahead of US ISM Service PMI data.

The AUD/USD pair has recovered sharply after slipping below the critical support of 0.6800. The Reserve Bank of Australia (RBA) has announced a rate hike by 50 basis points (bps) consecutively for the fourth time to combat soaring price pressures. Officially, the RBA’s Official Cash Rate (OCR) has increased to 2.35%.

As price pressures are accelerating dramatically in the Australian economy and households are facing the headwinds of higher payouts, a rate hike decision by the RBA was highly expected. The Australian inflation rate has been recorded at 6.1% for the second quarter of CY2022. This has squeezed the margins of corporate significantly. The corporate has failed to pass on the impact of inflated-input prices to the end consumers.

This week, more fireworks are expected from the Australian economic calendar as the Australian Bureau of Statistics will report the Gross Domestic Product (GDP) numbers. The Australian economy is expected to grow by 1% on a quarterly basis vs. 0.8% recorded in the prior quarter. Solid GDP data will strengthen the aussie bulls further.

Meanwhile, the US dollar index (DXY) has extended its gains after overstepping the immediate hurdle of 109.50. Earlier, the DXY printed a low of 109.40 amid lower consensus for the US ISM Services PMI data. The economic data is seen lower at 55.5 than the prior release of 56.7.