AUD Surges to Three-Month High on Inflation-Fueled Rate Hike Expectations

The Australian dollar has extended its winning streak to nine weeks, reaching a new three-month peak as inflation data suggests an imminent rise in interest rates. The Aussie rose 0.2% to $0.7204, surpassing key resistance at 72 cents and setting its sights on the May high of $0.7277, its highest level since mid-2022. This marks the longest winning streak for the currency since 2010.

The AUD also outperformed against its major peers, gaining 0.7% against the kiwi, up 0.8% against the Japanese yen, and rising 0.7% on the euro. The sharp repricing in the Reserve Bank of Australia's interest rate outlook has led to a 52% probability that the fourth rate hike this year could come as soon as next month.

Three-year government bond yields jumped 10 basis points this week to 4.679%, while 10-year bond yields rose 6 bps to 5.098%, the highest since May. The market's shift in expectations has left bonds nursing heavy losses.