Aussie Dollar Surges as Inflation Data Sparks Rate Hike Fears

The Australian dollar has surged to its highest level since late March after inflation figures were released on Wednesday. The data showed that inflation for the 12 months to July was at 3.5 per cent, with the trimmed mean, the Reserve Bank of Australia's preferred underlying measure, at 3.6 per cent.

This is higher than market forecasts of 3.2-3.3 and 3.5 per cent respectively, which has caused traders to react quickly. The ASX200 had started the day in the green but went into reverse after receiving the inflation print, to be down about 0.2 per cent by 1pm.

eToro analyst Josh Gilbert said that 'rate expectations are only heading one way today' and that a rate hike later this year is 'firmly back on the table'. Some economists are now pencilling in rates to hit a 15-year high of 4.60 per cent before Christmas, while others remain unsure.

The RBA will receive updated GDP figures before its next meeting, but there is consensus among economists that inflation remains too high and that bodes poorly for borrowers hoping for the RBA to hold fire.