Hawkish RBA Rate Decision Boosts Aussie Dollar

Risk-on flows took hold in a partial reversal of Monday's price action, while hawkish surprises provided by the RBA’s monetary policy decision boosted the Aussie dollar.

• Australia's central bank raised the cash rate target by 25bp and signalled that meeting its inflation target “will require a further lift in interest rates over the period ahead”. Consensus was looking for a 15bp hike, while the swaps market was pricing just shy of that amount.
• It was a live meeting and ahead of the rate decision announcement, AUD/USD overnight implied volatility reached its highest point since the eve of the RBA's monetary policy decision delivered on Mar 2, 2021.
• Post-RBA impetus allowed AUD/USD to surged above the $0.7100 mark, which kept a lid on gains earlier in the Asia-Pac session. AUD/NZD took out resistance from the psychologically significant NZ$1.1000 figure, which limited gains on Apr 21, and attacked next resistance from Aug 18, 2020 high of NZ$1.1044.
• The greenback dropped back after yesterday's rally. Reminder that the FOMC also holds a policy meeting this week, with the outcome due to be announced on Wednesday.
• Offshore yuan reversed its initial gains after CCTV reported that the authorities in Hangzhou slapped curbs on an individual surnamed "Ma", even as Alibaba's shares rebounded as a statement from local police suggested that the tech giant’s co-founder could not be the person in question.
• Activity in Asia was limited by holiday closures in some major regional financial centres including mainland China, Japan and Singapore.
• Later in the day, focus will turn to U.S. factory orders & final durable goods orders, EZ jobs data as well as comments from BoC's Rogers.