AUD/USD Rally Falters on Renewed Fed Hike Expectations

The Australian dollar's 10-week rally has stalled due to renewed expectations of a Federal Reserve interest rate hike. The hot US inflation data released on Thursday added pressure on the Fed to raise rates, with markets pricing in an 87% probability of a 25-basis-point hike this week.

Rising crude oil prices have further complicated the inflation outlook, and the Australian dollar's momentum has weakened as a result. The Reserve Bank of Australia (RBA) officials are also keeping September tightening risks alive, which is contributing to the uncertainty in the AUD/USD pair.

The RBA's upcoming meetings and speeches will be closely watched for any hawkish guidance that could reinforce expectations of a September rate hike. Westpac has abandoned its previous hold-through-2026 view in favor of a November increase, while several major banks have brought forward their calls for a September hike.