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Hot Australian CPI lifts AUD/USD, RBA hike odds rise
Austria’s inflation report showed CPI up 1.0% month on month in July, pushing markets to price a fourth RBA hike for September at 36% versus 17% earlier.
The Australian dollar strengthened against the US dollar on Wednesday, trading about 0.2% higher near 0.7180 in early European trade, as hotter Australian inflation boosted expectations for the Reserve Bank of Australia to raise rates again this year, according to FXStreet.
FXStreet said Australia’s CPI rose 1.0% month on month in July, above estimates of 0.8%, while annual CPI came in at 3.5% versus 3.2% expected. Market pricing for a fourth RBA hike at the September meeting increased to 36% from 17%, and a move by February next year is now priced at 94%.
FXStreet also pointed to RBA July meeting minutes that indicated several board members saw a further hike as “quite possible” if upside inflation risks emerge. On the US side, investors are waiting for the US personal consumption expenditure price index data for July, with core PCE expected steady at 3.3% year on year, closely watched by Federal Reserve officials.
In technical terms, FXStreet said AUD/USD was near 0.7178, holding above the 20-period exponential moving average at 0.7092, with the 14-day relative strength index at 68.4, suggesting strong but increasingly stretched upside momentum. Immediate support was cited around the day’s opening level near 0.7178.