AUD/USD Surges to Near 11-Week High Amid US Dollar Weakness

The Australian dollar (AUD) has seen an eight-week rally, its strongest since December 2020, pushing AUD/USD to an 11-week high of near $0.72.

This surge is partly due to the US Treasury's surprise buyback plan, which has kept the US dollar under pressure. However, market attention will shift to the Jackson Hole symposium later this week, where Fed speeches often lay the groundwork for policy shifts.

Fed Chair Kevin Warsh's speech at Jackson Hole is expected to provide crucial information on the Fed's reaction function and how it views persistent inflation, elevated oil prices, and rising Treasury yields. Traders are looking for reassurance that the Fed is not itching to hike rates, which could weigh on US dollar yields and boost AUD/USD.

Australia's inflation rate needs to reaccelerate to revive RBA hike bets, but unless this happens, the Reserve Bank of Australia (RBA) will likely retain its hawkish bias. Meanwhile, AUD/USD technical analysis shows strong inverse correlation with the US Dollar Index and correlations above +0.9 with CNH/USD.