AUD Surges to 10-Week High Amid US Economic Downturn

The Australian dollar has reached a 10-week high of $0.709 as the Reserve Bank maintained its hawkish policy stance, while the US dollar weakened amid softer economic data.

Recent figures from the US showed subdued inflation rates, with consumer sentiment and retail sales also declining. As a result, markets now price roughly a one-in-three chance of a September rate hike, down from nearly 50% before the latest data.

The Reserve Bank of Australia (RBA) held its cash rate at 4.35% for a second consecutive meeting last week, with Governor Michele Bullock stating that rates might need to rise again due to ongoing weak productivity growth and the Strait of Hormuz remaining closed.

RBA Assistant Governor Christopher Kent also noted that tighter monetary policy was working as designed, but its full effects on activity and inflation would take time. Markets currently price around a 70% chance of one final move to 4.60% by early next year.