AUD Soars on Higher-than-Expected Inflation Data

The Australian Dollar (AUD) has outperformed its major currency peers on Wednesday, trading 0.2% higher against the US Dollar (USD) to near 0.7180 during the early European trading session.

This strength comes after hotter-than-projected Australian Consumer Price Index (CPI) data was released earlier in the day. The CPI growth rate rose by 1% Month-on-Month (MoM) in July, exceeding estimates of 0.8%, and on an annualized basis, the CPI growth was stronger at 3.5% from 3.2% estimates.

Market participants have nudged up the chance of a fourth rate hike by the Reserve Bank of Australia (RBA) in the September policy meeting to 36% from 17%, while a move by February next year is now priced at 94%. The RBA minutes of the July policy meeting also showed that several board members see an interest rate hike 'quite possible' if upside inflation risks start materializing.