Aussie Dollar Surges as Hawkish RBA Bets Build

The Australian dollar is gaining strength against its major crosses, driven by increasing bets of a rate hike from the Reserve Bank of Australia (RBA). The latest inflation data for July showed uncomfortably high numbers, prompting markets to price in a full RBA rate hike by November.

Instead of tracking AUD/USD, which is more susceptible to broader risk appetite shifts, moves against major crosses like EUR/AUD and GBP/AUD offer a cleaner expression of interest rate differentials. With markets now borderline pricing a full RBA rate hike by November, the Aussie dollar is breaking key levels against these pairs.

The catalyst for the latest bout of Aussie strength was Australia's July inflation report, which showed hot numbers that are fueling bets of an imminent rate hike. The trend in household spending is also pointing higher, with the rate of change catching central banks' attention.