Aussie Dollar Surges as Hawkish RBA Bets Build
The Australian dollar is experiencing a surge against its major crosses, driven by an increase in hawkish Reserve Bank of Australia (RBA) pricing following the release of inflation data for July. Rather than focusing on AUD/USD, which is more susceptible to shifts in risk appetite, traders are looking at moves against EUR/AUD, GBP/AUD, and AUD/NZD to gauge interest rate differentials. With markets now pricing a full RBA rate hike by November, the Aussie dollar is breaking key levels against each of these crosses.
The catalyst for this latest bout of Aussie strength was Australia's July inflation report, which saw the country's annual inflation rate jump to 3.8% in July from 2.9% in June. This has led to an increase in hawkish RBA pricing, with markets now borderline pricing a full rate hike by November.
The Aussie dollar is benefiting from this shift in interest rate differentials, breaking key levels against the euro, British pound, and Kiwi dollar. Traders are closely watching these crosses as they offer a cleaner expression of interest rate differentials than AUD/USD.