AUD Holds onto Recovery as Inflation Data Reinforce RBA Hike Expectations
The Australian Dollar (AUD) is clinging to its early recovery against the US Dollar (USD), trading near 0.6970 during the European session on Wednesday.
The AUD/USD pair experienced a weak opening, but attracted bids near 0.6958 after the release of the hot August Consumer Price Index (CPI) data, which reinforced expectations of more interest rate hikes by the Reserve Bank of Australia (RBA) in the near term.
Analysts at Commerzbank argue that the latest inflation data underscore why market pricing for “1.5 additional rate hikes by the RBA” is now a reality, rather than just a possibility. They note that while there's no question that inflation is still too high, it will take time to return to the middle of the target range.
The CPI report showed that inflationary pressures accelerated to 4% Year-on-Year (YoY), as expected, from 3.5% in July. The US Dollar is also under pressure ahead of the United States (US) ADP Employment Change data for September and the Personal Consumption Expenditure (PCE) Price Index data for August.