The Australian Dollar is currently experiencing upward momentum, reaching multi-month highs against the US Dollar. This appreciation is fueled by expectations of further interest rate hikes by the Reserve Bank of Australia (RBA) in response to persistent inflation. While a rate hike in March is less likely, markets anticipate a move in May and further tightening throughout the year. A weaker US Dollar further supports the Aussie, though trade uncertainties may limit its upside potential.
- The Australian Dollar appreciated to around $0.713, the highest level since early August 2022.
- Markets are pricing in an 80% probability of an RBA rate hike in May.
- January inflation surprised on the upside, supporting the expectation of rate hikes.
- The RBA’s preferred core inflation gauge edged up to 3.4% YoY.
- The RBA Governor reiterated that policy patience is warranted.
- Manufacturing and Services PMIs remain in expansion territory.
- China’s economic performance is no longer a drag on the Aussie.
- CFTC data shows non-commercial traders increased net long positions in the Aussie.
- The RBA lifted the Official Cash Rate (OCR) to 3.85% earlier this month.
The prevailing economic conditions suggest a positive outlook for the Australian Dollar. Inflation concerns prompt anticipation of further monetary tightening, bolstering the currency’s value. While global risks could pose a threat, current trends indicate sustained strength for the Aussie.