AUD/USD, NZD/USD, and USD/JPY Reaction to RBA Rate Cut, Economic Growth, and Inflation Trends

RBA Rate Cut Signals Growth Amid Easing Inflation

The Reserve Bank of Australia cut the cash rate by 0.25% to 3.6%, in line with market expectations. This is the third cut of the year and aims to provide relief for borrowers. The move signals a shift toward supporting economic activity amid moderating inflation.

Lower interest rates tend to weaken the Australian dollar, as returns on local assets become less attractive. For AUD/USD, the rate cut adds downside pressure, especially if markets anticipate further easing. However, there is no big reaction to AUD/USD after the rate cuts as the decision was expected. The pair’s response will depend on the RBA’s forward guidance during RBA press conference.

The decision comes as inflation returns to the 2–3% target range. The chart below shows that the trimmed mean inflation has returned to 2.7% and headline inflation returns to 2.1%.

Moreover, the cost-of-living relief measures and weaker domestic demand have eased price pressures. For the economy, the moderation in inflation provides the RBA room to stimulate growth without stoking excessive price rises. This environment may encourage households to spend more, giving a boost to sectors hit by slow consumption earlier in the year.

Global Trade Tensions Create a Mixed Outlook for the Australian Dollar

On the other hand, the economic uncertainty remains high due to global trade tensions, particularly from Donald Trump’s tariff policies. While extreme scenarios seem less likely, trade disputes are expected to dampen global growth. For Australia, this creates a mixed backdrop for the AUD. Weaker global growth pressures the currency, while rising commodity prices from supply disruptions could provide support. Investors will closely watch US trade policy developments for AUD/USD direction.

The labour market has eased slightly but remains relatively tight. The unemployment sits at 4.3%, and wage growth has slowed, as shown in the chart below.

A softer labour market could justify further rate cuts, which would weigh on the Australian dollar. Conversely, stronger-than-expected hiring or wage gains could limit the RBA’s need for aggressive easing, helping the currency stabilise.

The outlook for AUD/USD hinges on whether the market sees this as the end of the easing cycle or the beginning of a deeper rate-cut path. A sustained break below key technical support could open the way for further weakness, while a rebound in consumer spending and commodity demand could help the pair recover.

AUD/USD Technical Analysis – Ascending Broadening Wedge Pattern

The 4-hour chart for AUD/USD shows the pair trading within an ascending broadening wedge pattern, with the rebound from 0.6440 driven by a sharp drop in the US Dollar Index from the 100.50 resistance. The pair is displaying strong bullish momentum within this pattern and is targeting the 0.6650 level. A break above 0.6650 could push the pair toward 0.6720. However, a break below 0.6320 will continue the pair to the downside.

NZD/USD Technical Analysis – Bullish Price Development

The 4-hour chart for NZD/USD shows the pair forming strong bullish price action above the 0.5870 level. The prolonged price consolidation within the long-term support zone of 0.55 to 0.56 has created a solid base pattern, triggering bullish momentum. As long as the pair holds above 0.5870, it is likely to move higher toward the 0.6121 level.

USD/JPY Technical Analysis – Neutral Zone

The 4-hour chart for USD/JPY shows the pair consolidating within the orange zone between the 140 and 151 levels. The sharp drop from 151 last week has triggered bearish price action, indicating a negative trend. A break below 146.60 would signal further downside toward 142. A breakout from either the 140 or 151 level will determine the next major move in USD/JPY.