The Australian dollar jumped to a three-month high on Wednesday after hotter-than-expected inflation data pushed traders to raise bets on another Reserve Bank of Australia rate hike. The broader US dollar stayed range-bound as markets awaited July PCE inflation data ahead of Fed Chair Kevin Warsh's Jackson Hole speech on Friday.
The Australian dollar advanced 0.3% on Wednesday, touching its highest level in nearly three months. The move followed a hot domestic reading on inflation. A separate reading put the pair at $0.71865, its strongest level in three months, before it eased slightly to trade last up 0.22%.
Hot core inflation fuels rate-hike bets
Australia's monthly consumer price index rose 1% in July, beating consensus forecasts of 0.8%. The headline annual rate cooled to 3.5%, but the RBA's preferred trimmed mean measure accelerated 0.5% on the month, keeping annual core inflation at 3.6%.
The sticky core figures prompted rate strategists to pull forward bets on a fourth RBA rate hike before year-end. Capital Economics analysts flagged persistent underlying price pressure as a reason the RBA could still hike again in the coming months, according to a research note. Elias Haddad of Brown Brothers Harriman still favors a longer RBA pause, arguing policy is already somewhat restrictive as the labor market cools, though he flagged Australia's carry appeal and its exposure to energy, AI and defense-linked commodities as key currency tailwinds.
Dollar holds pattern before PCE and Jackson Hole
The broader US dollar traded in a narrow range as investors awaited Wednesday's release of the July Personal Consumption Expenditures price index, the Federal Reserve's preferred inflation gauge. Economists polled by Reuters expect core PCE to have risen 3.3% from a year earlier, unchanged from June and above the Fed's 2% target.
The data marks the last major checkpoint before Fed Chair Kevin Warsh delivers his first keynote address at the Jackson Hole Economic Policy Symposium on Friday. Traders will look for clues on whether further rate hikes may be needed to bring inflation back to target.
Sources: Investing.com, Investing.com
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