AUD Surges as RBA Rate Hike Expectations Rise, USD Traders on Hold

The Australian dollar surged to its highest level in nearly three months after the Reserve Bank of Australia (RBA) released hotter-than-expected domestic inflation data. The RBA's preferred trimmed mean measure accelerated 0.5% on the month, keeping annual core inflation elevated at 3.6%. This prompted interest rate strategists to aggressively pull forward expectations for a fourth RBA rate increase before year-end.

According to Elias Haddad, global head of markets strategy at Brown Brothers Harriman, 'We still think the risk is skewed towards a more extended pause in the RBA tightening cycle because policy is already somewhat restrictive and the labor market is softening.'

In contrast, the US dollar traded in tight ranges against other G-10 currencies ahead of crucial US inflation data and central bank policy guidance. The greenback remained virtually unchanged, ticking up 0.1% to 98.98.