The Australian dollar extended its rally for a third straight session after NAB, CBA and ANZ all shifted to forecasting another RBA hike this year, with Goldman Sachs and Citi joining the hawkish call. The US dollar steadied too, but traders read that move as defensive positioning ahead of Fed Chair Warsh's first major Jackson Hole address on Friday, not a new bullish signal.
The Australian dollar was the strongest currency on Thursday for a third straight session, driven by a rapid shift in expectations for Reserve Bank of Australia policy. NAB, CBA and ANZ now all forecast another hike this year, while Goldman Sachs and Citi joined an increasingly hawkish sell-side consensus.
Three banks flip on RBA outlook
The repricing rests on more than one data point. RBA minutes showed policymakers were prepared to consider pre-emptive tightening. July inflation data then kept Trimmed Mean CPI at 3.6%. Household spending then showed resilient demand, particularly in services and discretionary categories.
Together, the releases have shifted the debate from whether the RBA's interest rate hike cycle is finished to whether the next move lands in September or November.
Dollar's bounce lacks a bullish story
The dollar steadied on Thursday, but the move looks tactical rather than structural. September rate-hike odds barely moved, edging from around 33% to 34%, which is not enough to explain a real shift in dollar sentiment.
More plausible drivers are calendar-related: month-end portfolio rebalancing and defensive positioning ahead of Warsh's speech. That contrast is the clearest FX signal of the day. The aussie's rally reflects genuinely new information, while the dollar's bounce reflects positioning ahead of information still to come.
Warsh speech looms as the bigger test
Everything now converges on Friday. Warsh's address can reshape near-term Fed pricing, but the larger question is whether he reinforces institutional separation between the Fed and the Treasury clearly enough to reassure markets worried about fiscal dominance influencing monetary policy.
Elsewhere, the Canadian dollar strengthened as Brent crude recovered above $87 on fresh geopolitical risks. The euro and sterling slipped against a firmer dollar, with sterling additionally pressured as markets trimmed BoE hike expectations.
Source: ActionForex
Trading involves risk.
Risk Disclaimer
