AUD Surges as RBA Signals Further Rate Hikes Ahead Amid Weaker USD
The Australian Dollar (AUD) continued its rally on Monday, trading around 0.7090 in Asian hours for the second consecutive session. Analysts at Societe Generale and Rabobank pointed to the Reserve Bank of Australia's (RBA) hawkish tone as a key driver behind the AUD's strength.
The RBA emphasized that it would not hesitate to act if needed, highlighting its readiness to tighten policy further if inflation does not slow as anticipated. This robustly hawkish stance has left some analysts questioning whether the RBA has finished its tightening phase.
A weaker US Dollar (USD) also contributed to the AUD's gains, as softer-than-expected US macroeconomic releases and evolving central bank expectations weighed on the greenback. Retail Sales declined by 0.6% month-over-month in July, reversing a 0.2% increase in June and missing consensus forecasts.
Market pricing now reflects a 33.1% probability of a rate increase next month, down from 44% a week earlier, based on the CME FedWatch tool. Federal Reserve official Austan Goolsbee's comments have also nudged market perceptions toward a less hawkish Fed path, but the US Dollar retains structural policy support.