The Australian Dollar is experiencing upward momentum, driven by increasing expectations of an imminent interest rate hike by the Reserve Bank of Australia. Inflation data exceeding expectations and a surprise drop in unemployment have strengthened the likelihood of a rate increase. Surging gold prices, a key Australian export, and a weakening US dollar are also contributing to the AUD’s strength.
- The Australian dollar rose above $0.70, reaching a three-year high.
- Hotter-than-expected inflation data and a surprising fall in unemployment have increased bets on a rate hike.
- All Big Four Australian banks now anticipate a rate hike.
- Market pricing reflects a greater than 70% chance of a rate hike soon.
- Gold prices have surged, boosting the commodity-linked currency.
- US dollar weakness is supporting the AUD.
- Markets estimate a high probability of a 25-basis-point rate hike at the next meeting.
- The rise in export and import prices reinforce the view that inflationary pressures are persistent.
- Renewed support for the US Dollar could cap the upside potential in AUD/USD.
The confluence of factors paints a bullish picture for the Australian Dollar in the short term. With the market heavily pricing in a rate hike and inflation remaining a concern, the AUD is likely to maintain its attractiveness relative to other currencies. However, potential resistance may come from a strengthening US dollar and ongoing global economic uncertainties.