AUD Weakens Ahead of Key Inflation Data Amid Rate Hike Odds
The Australian Dollar is weakening to near 0.7200 as traders await the upcoming US Producer Price Index (PPI) inflation data, which will provide crucial clues about the monetary policy outlook of the Federal Reserve ahead of its meeting next week.
Market participants are pricing in a 60% odds of an interest rate hike at the central bank's policy meeting next week, according to the CME FedWatch Tool. Traders are looking for hints from the PPI data on Thursday and Consumer Price Index (CPI) data on Friday.
RBA Assistant Governor Sarah Hunter said that the Reserve Bank of Australia may need to raise interest rates again if inflation proves more persistent than expected, keeping alive the prospect of another hike at its September meeting. Analysts at Rabobank note that the RBA has turned more overtly hawkish after RBA official Hauser delivered a 'hawkish speech', which has markets thinking of hikes this month and in November.
The AUD/USD holds above the 20-day simple moving average (SMA) and comfortably over the 100-day SMA, suggesting a constructive near-term bias. Price is pressing the upper half of the Bollinger envelope, while the Relative Strength Index (RSI) at about 67 stays just below overbought territory.