RBA set for fifth hike of 2026 to 4.85%: three views on what comes next
The Australian dollar (AUD) faces a critical juncture as the Reserve Bank of Australia (RBA) is poised to raise rates by 25 basis points to 4.85%, marking its fifth hike this year. However, with this increase largely anticipated, market reaction may be muted, and a sell-the-fact scenario could ensue if the RBA signals a pause in future hikes. Per the full note from investinglive-cb, guidance on future policy will be crucial; a hawkish signal supporting potential further tightening could buoy the AUD, while a more dovish approach could limit its gains amidst global factors like U.S. midterm elections and geopolitical tensions involving Iran.
What the desk is arguing
The desk believes that the Australian dollar's immediate reaction to the RBA rate hike may not be as strong as expected, especially if the bank hints at a pause in tightening. According to the source, although the hike is priced in, guidance will ultimately dictate AUD's trajectory post-decision. A signal of further hikes would align with ANZ's outlook and support the currency, while AMP's more cautious stance might cap potential gains.
Positioning in the market reflects a cautious sentiment, particularly given the current AUD trading around 70 cents versus the USD. With strong market correlation to U.S. rate actions due to increasing likelihood of continued Fed hikes, expectations of rate differentials sustaining support for the AUD appear weaker than previously assumed. This suggests a delicate balance for traders navigating upcoming market dynamics.
Where it sits in our coverage
Our consensus target for AUD/USD stands at 0.7100, with a range from 0.6600 to 0.7300 across participating firms. Notably, hsbc projects a December target of 0.7000, while scotiabank maintains a more bullish view at 0.7500 for the same timeframe.
This forecast indicates a moderate alignment with the broader consensus, suggesting that while near-term speculation may be positive, the upper end of the target range reflects some optimism, especially compared to bearish assessments from firms like bofa, who expect only a target of 0.6800 in December.
How other firms see it
The prevailing view suggests alignment among firms like anz and jpmorgan, who anticipate continuing RBA hikes. Conversely, deutschebank stands out with a hold call, indicating divergence in expectations for further tightening.
Highly correlated dynamics to monitor include U.S. monetary policy shifts, particularly with the Federal Reserve's stance, which will affect not just the AUD/USD but also the overall risk sentiment in markets.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The RBA is expected to hike rates by 25bp, raising concerns that a strong reaction from AUD may not materialize.
- 02Future guidance from the RBA is critical, with a hawkish signal likely to support the AUD, while a dovish tone may limit gains.
- 03Current external factors, including U.S. policy and geopolitical tensions, are weighing on AUD's performance.
- 04Market positioning reflects a cautious sentiment in anticipation of the upcoming rate decision.
Market implications
Watch for the AUD to react around the 0.7060 level post-RBA decision, especially if guidance indicates a pause in hikes. Any signals from the Fed's upcoming events could further influence AUD/USD behavior ahead of key market shifts.
Risks to this view
A shift towards a more dovish trajectory from the RBA could invalidate this bullish stance on AUD, while unexpectedly strong data from the U.S. leading to aggressive Fed policy shifts could enhance downward pressure on the currency.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Citi | Bearish | 0.6700 |
UBS | Bullish | 0.7300 |
UOB | Bearish | 0.7120 |
With a hike close to fully priced, the Australian dollar may struggle to rally much on the decision itself, and a sell-the-fact dip is possible if the statement leans toward a pause. Guidance is the swing factor for the currency. A signal that more tightening is possible, in line with ANZ’s view, would support the AUD and push front-end yields higher.
A message closer to AMP’s hike-and-hold call would likely cap gains. The AUD, trading near 70 US cents, also faces strong outside drivers, with the US midterm elections and Iran tensions setting the broader risk mood. With the Federal Reserve also on a hiking path, rate differentials offer less of a tailwind than the RBA move alone might suggest. --- Earlier: Deutsche Bank stands alone with RBA hold call as 31 of 32 economists tip a hike JPMorgan joins hike call for RBA’s November meeting, sees tightening bias persisting RBA set for fifth 2026 hike to 4.85% as banks flag risk of another move in February ING lifts AUD/USD target to 0.71 as it backs a 25bp RBA hike next week RBA set for back-to-back hike after hot CPI, says Natixis’ Garcia Herrero --- Economists agree the RBA will hike again, but the split over what comes next, along with a hike already in the price, means the guidance will matter more than the move for the Australian dollar.
Summary: The RBA is widely expected to raise its cash rate by 25 basis points to 4.85% on Tuesday, its fifth increase this year and the highest level since 2008 The decision is due at 2:30 p.m. AEDT (0330 GMT), followed by Governor Michele Bullock’s press conference HSBC’s Paul Bloxham has a November hike as his base case; ANZ sees a material risk the cash rate reaches 5.10% by December or February AMP chief economist Shane Oliver expects a hike to protect the RBA’s credibility, but thinks it should be enough to keep the bank on hold for now September-quarter trimmed mean inflation of 1.0% beat the RBA’s 0.8% forecast, while house prices fell for a seventh straight month in October With the move largely priced, the AUD’s reaction is likely to depend on guidance rather than the hike itself The Reserve Bank of Australia is widely expected to raise its cash rate by 25 basis points to 4.85% on Tuesday. That would be its fifth increase this year and take the rate to its highest level since 2008.
Economists agree on the move but are split on what comes after it. The decision is due at 2:30 p.m. AEDT (0330 GMT), with Governor Michele Bullock’s press conference to follow.
The bank lifted the cash rate to 4.60% in September, and hawkish remarks from senior officials since then have pushed forecasters toward another rise. Underlying inflation has also run hotter than the RBA projected, with the trimmed mean rising 1.0% in the September quarter against the bank’s 0.8% forecast. HSBC chief Australia economist Paul Bloxham has made a November hike his base case.
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