AUD/USD Climbs as Australian Inflation Sparks Rate Hike Hopes
The Australian dollar gains as stronger-than-expected inflation data in Australia fuels market expectations of a potential interest rate hike by the Reserve Bank of Australia (RBA) at its next meeting.
AUD/USD Holds Near 0.7050 as Strong Australian Inflation Fuels RBA Rate Hike Bets
The AUD/USD pair is trading around 0.7050 on Thursday at the time of writing, up 0.25% on the day, extending its positive momentum. The pair is supported by renewed optimism surrounding Australia’s monetary policy outlook.
The Australian dollar is benefiting from stronger-than-expected Australian inflation data, which has reinforced expectations of a near-term interest rate hike by the Reserve Bank of Australia (RBA). According to the ASX interest rate tracker, markets are now pricing in more than a 70% probability of a 25-basis-point rate increase as early as the next RBA meeting. This rapid repricing of rate expectations is boosting the Australian dollar (AUD) by improving its relative yield appeal against major currencies, including the U.S. dollar.
Recent data showed a pickup in both headline and core inflation, signaling that price pressures remain persistent. This development complicates the task for the RBA, which continues to face inflation well above its target range while economic activity and domestic demand remain resilient.
Additionally, the rise in export and import prices during the latest quarter supports the view that inflationary pressures are not merely temporary, further strengthening the case for tighter monetary policy in Australia.
