The Australian Dollar (AUD) has struggled to surpass its 200-day moving average, but stronger-than-expected inflation data has bolstered the case for further interest rate hikes by the Reserve Bank of Australia (RBA). According to Elias Haddad of Brown Brothers Harriman, the latest Consumer Price Index (CPI) figures exceeded forecasts, reinforcing expectations of tighter monetary policy.
September’s headline CPI rose 4.3% year-over-year, up from 4.0% in August, driven by rising housing and transport costs. This surpasses the RBA’s August projections, which had forecast year-end headline CPI at 3.6%. The trimmed mean CPI matched consensus at 3.6% year-over-year, up from 3.5% in August, while the policy-relevant Q3 trimmed mean CPI came in hotter at 3.7% year-over-year, compared to 3.6% in Q2.
The stronger inflation data has significantly increased the likelihood of an RBA rate hike. Futures now price in a 4.85% chance of a 25 basis point hike on November 3, up from 60% previously, and have raised bets for another hike in Q1. This has provided support for the Australian Dollar, despite its failure to break above the 0.7056 resistance level, with immediate support seen at 0.7000.