AUD/USD Shorts Face Fresh Pressure as Hot CPI Revives RBA Hike Expectations

The Australian dollar gained momentum after the release of hot inflation data in July. The trimmed mean CPI rose by 0.5% month-over-month, its strongest increase since May, while annual underlying inflation remained at 3.6%. This has revived expectations for another rate hike from the Reserve Bank of Australia (RBA), which could put additional pressure on short positions in AUD/USD.

The RBA minutes released yesterday revealed that some members considered raising the cash rate by 25 basis points in August, but ultimately decided to hold. The hot CPI data highlights the upside risks they were concerned about, and increases the odds of a live meeting in September compared to 24 hours ago.

AUD/USD shorts may face fresh pressure after today's inflation figures, as elevated short exposure in futures and renewed RBA hike risk provide support for an already strong Australian dollar. The ASX 200 is flat for the day, while bond markets delivered a hawkish response with Australian 2-year yields jumping sharply.