AUD/USD Hinges on RBA-Hawkishness vs US CPI Report

The Australian dollar is at a crucial juncture as it faces a potential decisive phase against the US dollar. The Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.35% in August, but Governor Michele Bullock's hawkish comments suggest another rate increase may be possible if inflation proves persistent.

The RBA is still battling inflation above its 2%-3% target range and expects it to ease to 3.6% by the end of 2026 and 2.6% by the end of 2027. However, there are significant upside risks, including energy prices remaining elevated due to geopolitical tensions.

The outcome will depend on the US July CPI report, which could determine whether American inflation strengthens expectations for easier Fed policy or reinforces a higher-for-longer outlook. A softer-than-expected report would be supportive of the AUD/USD, while a stronger reading could push Treasury yields and the dollar higher, reversing any gains.