Australian Dollar Rises Amid RBA Rate Hike Prospects

(RTTNews) - The Australian dollar strengthened against other major currencies in the European session on Thursday, as markets increased hawkish Reserve Bank of Australia (RBA) wagers, following the release of the hotter-than-expected Australian Consumer Price Index (CPI) report for July.

"Australian headline inflation eased from 3.8% YoY in June to 3.5% YoY in July, while trimmed mean inflation held steady at 3.6% YoY," according to the most recent Australian inflation statistics, which was stronger than expected."

They highlight that "both measures came in above market expectations," pointing out that "the RBA is targeting an average trimmed mean inflation rate of 3.3% YoY in 2026, making July's reading an unhelpful start to the second half of the year."

Today, the case for further tightening was also strengthened by Australia's July household spending figures, which showed a 7 percent YoY increase.

Markets fully priced an additional 25bp hike by February 2027, up from around a 70% probability prior to the inflation release.

Investors turning cautious ahead of Federal Reserve (Fed) Chairman Kevin Warsh's speech at the Jackson Hole Symposium on Friday.

In the Asian trading today, the Australian dollar rose to a 5-1/2-year high of 0.9979 against the Canadian dollar, nearly a 3-month high of 0.7123 against the U.S. dollar and a 9-day high of 1.2092 against the NZ dollar, from early lows of 0.9957, 0.7175 and 1.2061, respectively. If the aussie extends its uptrend, it is likely to find resistance around 1.00 against the loonie, 0.73 against the greenback and 1.21 against the kiwi.

Against the euro and the yen, the aussie advanced to nearly a 3-1/2-month high of 1.6188 and a 1-month high of 114.68 from early lows of 1.6244 and 114.19, respectively. The aussie may test resistance around 1.60 against the euro and 115.00 against the yen.

Looking ahead, Canada current account for the second quarter and average weekly earnings for June, U.S. goods trade balance for July, U.S. weekly jobless claims data, retail and wholesale inventories for July, U.S. Kansas Fed composite and manufacturing indices for August are slated for release in the New York session.