AUD May Miss Out on Further Reserve Bank of Australia Rate Hikes

The Australian Dollar may not receive further support from the Reserve Bank of Australia (RBA) after softer August Consumer Price Index (CPI) data, according to Commerzbank's Volkmar Baur. Market expectations for 1.5 additional RBA hikes look excessive in light of the recent inflation numbers.

Baur notes that while inflation remains above target, there are lagged effects from past tightening and weakness in the real estate sector, particularly with regards to building permits and property prices. The August CPI data showed a decline in building permits by 6.1% compared to the previous month, and ongoing price drops in major cities.

Given these factors, Baur believes the RBA is likely to wait before making further rate hikes, which would limit any potential tailwind for the Australian Dollar.