Aussie Dollar Surges on Hawkish RBA Bets as Inflation Risks Rise
The Australian dollar has surged against several major currencies due to increased expectations of a rate hike by the Reserve Bank of Australia (RBA).
Australia's July inflation report revealed that headline inflation rose 1.0% for the month, leaving the annual rate at 3.5%, which is above market expectations.
The RBA has repeatedly stated that it needs to see demand soften before it can be confident that inflation will return sustainably to target. However, the recent household spending data showed a nearly threefold increase from expected levels, with nominal spending rising 1.1% for the month.
This has led market pricing for another RBA rate hike to tick higher, with a move by November now seen as close to a lock at just shy of 98%. The implied probability of an earlier move in September has also increased to nearly a 50-50 bet.