Aussie Surges to Six-Week High as US Dollar Weakens

The Australian dollar has surged to a six-week high of above $0.70, driven by broad weakness in the US dollar. This comes as markets imply next to no chance that the Reserve Bank of Australia will hike interest rates at its August meeting and only even odds of a move by December.

This shift is largely due to softer-than-expected second-quarter inflation figures, which reduced the need for further policy tightening. While RBA governor has recently warned that another rate hike may still be needed to bring inflation back to target, this warning does not seem to have had a significant impact on market expectations.

The greenback also weakened broadly after June inflation data came in softer than expected, prompting investors to further scale back expectations for additional Federal Reserve rate hikes. Additionally, suspected intervention by Japanese authorities to support the yen has weighed on the US dollar, providing further support for the Aussie.