Above: File image of RBA Governor Lowe, source: ABC. Image Pound Sterling Live.

For a boost, the Aussie Dollar will need a surprisingly strong Australian inflation reading next week to prod the Reserve Bank of Australia (RBA) into restarting its interest rate hiking cycle.

According to the minutes of the RBA's July monetary policy meeting, there was increased backing from board members for a decision to keep interest rates unchanged when compared to earlier such decisions to hit the pause button.

The Australian Dollar is down against the majority of G10 currencies over the course of the past month amidst underwhelming Chinese economic growth and the RBA's decision to keep interest rates unchanged and these minutes will do nothing to turn the momentum.

"We read today’s minutes from the July meeting which delivered a steady rate decision as modestly dovish despite yet another discussion for the fourth month in a row over whether to hold or hike," says Su-Lin Ong, Chief Economist for Australia at RBC Capital Markets.

Ong notes the minutes suggested that "the case to hold the cash rate unchanged at this meeting was the stronger one" and unlike previous meetings, there was no reference to a "finely balanced" decision.

Above: The Australian Dollar is a laggard when screened over the past month.

Relative interest rates are a key driver of foreign exchange value in the current environment as investors favour currencies that offer greater returns, i.e. the higher the domestic interest rates, the greater the inflow of foreign capital as investors seek greater returns, which boosts the value of the domestic currency.

If the RBA has finished its rate hiking cycle the Aussie Dollar will find itself at a rate disadvantage against those currencies with higher rates, for example, the Pound.

The odds for further RBA rate hikes were reinforced by the RBA's more detailed discussions about the case to keep interest rates unchanged.

For instance, the RBA noted "the stance of monetary policy was clearly restrictive" and highlighted the inverted yield curve as "consistent with a contractionary monetary policy setting".

The mortgage interest payments/disposable income ratio was meanwhile said to be at a record and would rise further.

Additionally, "consistent with the Governor’s 12 July speech and Q&A which suggested emerging 'cross-currents' to the inflation outlook and more uncertainty, the reference to upside risks to inflation in the last 2 sets of minutes was also dropped," says Ong.

Australian inflation is due for release next week and given the guidance from the minutes, only a notable upside surprise will likely convince the RBA to raise interest rates again.

This can keep the Australian Dollar under pressure over the coming weeks.

The next meeting is on August 1 and overnight index swaps are only pricing in a 22% chance of another 25bp hike then.

However, one Australian bank reckons the RBA still has more work to do if it is to get inflation lower.

"Key releases ahead of the August Board meeting include the June quarter inflation report, and updates on the labour market and consumer spending. In our view, the data to date and our forecasts suggest that further hikes are needed to get inflation sustainably down to the 2-3% band in a reasonable timeframe and guard against risks of inflation expectations rising," says Jarek Kowcza, Senior Economist at St.George Bank.