AUD Surges as RBA Hike Bets Soar Amid Strong Economic Data

The Australian dollar has strengthened against major European currencies due to improved economic data and higher expectations for an upcoming interest rate hike by the Reserve Bank of Australia (RBA).

A series of positive economic releases, including inflation, spending, and GDP numbers, have beaten market forecasts, increasing the likelihood of a RBA rate hike in September. As a result, RBA hike pricing has surged to 76%, up from less than 10% in late August.

The improved local data pulse is also reflected in Citi's Economic Surprise Index, which has turned positive at +10.1 after a significant turnaround from its low point in July. This indicates that the RBA may be hiking interest rates for the right reasons, as demand remains robust and inflationary pressures increase due to high energy prices.

The AUD/USD pair, however, remains driven by US rate expectations and risk appetite, making it more sensitive to upcoming economic data releases in the United States. The pair is currently trading within a strong bullish trend from its June lows but has settled into a sideways range, with resistance above 0.7200 and support at 0.7130.