The Australian dollar hit a three-month high on Friday and is on track for its fifth straight weekly gain after hotter-than-expected inflation data revived bets on another Reserve Bank of Australia rate hike. Traders now see a 38% chance of a September move, up sharply from before the report.
The Australian dollar climbed to its strongest level since May 15 on Friday, extending a rally built on surprise inflation numbers. The move keeps AUD/USD on pace for a fifth consecutive weekly rise.
Inflation surprise reshapes rate bets
Data this week showed Australia's monthly consumer price index rose 1.0% in July from June, above economists' expectations for a 0.8% increase, while annual inflation eased to 3.5% from 3.8%. The trimmed mean, the RBA's preferred gauge of underlying price pressure, rose 0.5% on the month and accelerated to 3.6% annually.
The stronger core reading prompted markets to sharply raise the odds of another move by the central bank. Pricing now shows the probability of a September hike rising to about 38%, from 17% before the inflation report.
According to Westpac: "The strong July monthly CPI does raise the chance of an RBA hike in November". The bank's analysts added that one data point is not enough to lock in a move.
RBA holds steady, flags persistent inflation
The RBA left its cash rate at 4.35% in August after three increases earlier this year. The central bank said inflation remained too high and was not expected to return to the midpoint of its target range until early 2028.
The AUD/USD pair was last up about 0.1% at $0.72, with the pair set for a 0.4% weekly gain — its fifth straight week higher.
Source: Investing.com
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