AUD/USD climbs to 0.7170 on rising RBA hike odds
The Australian Dollar gains 0.17% as market pricing for a September rate increase jumps to 72%.
The Australian Dollar rose 0.17% on Friday, reaching 0.7170 against the US Dollar. This move reflects a sharp increase in expectations for further monetary tightening in Australia. Traders now assign a 72% probability to a rate hike at the Reserve Bank of Australia’s next meeting. This figure marks a significant jump from the 54% probability recorded at the start of the month.
The shift in sentiment follows a series of hawkish statements from RBA officials. Assistant Governor Sarah Hunter noted that the central bank may need to raise rates if inflation remains persistent. Deputy Governor Andrew Hauser described inflation as a major problem for the economy. He confirmed the RBA is prepared to act if necessary. These comments have directly influenced the pricing of the Official Cash Rate by financial markets.
US inflation data lifts Fed hike bets
US producer inflation data released on Thursday exceeded market expectations. The August Producer Price Index rose 5.4% year-over-year, surpassing the 5.3% consensus forecast. The monthly increase was 0.4%, matching predictions. Core inflation rose 0.2%, slightly below expectations. These figures have reinforced the view that the Federal Reserve will continue its tightening cycle.
Market participants now see a near 70% chance of a 25-basis-point rate hike by the Fed at its next meeting. This assessment is based on data from the CME FedWatch tool. Stronger inflation figures in the US support the US Dollar, creating a mixed environment for the Australian Dollar. The relative strength of the AUD is driven primarily by domestic rate expectations rather than global dollar weakness.
CPI release sets next direction
The market attention now turns to the US Consumer Price Index due later on Friday. This is the final major inflation release before the Federal Reserve’s monetary policy decision next week. Economists expect the headline index to rise 3.4% year-over-year in August. Core inflation is forecast to increase 2.4% over the same period. Any deviation from these figures could alter interest rate expectations.
A surprise in the CPI data will determine the next directional move for AUD/USD. The Australian Dollar remains capped below key technical levels. The pair trades below the 100-period and 200-period simple moving averages. Immediate resistance sits at 0.7176, followed by the 200-period SMA at 0.7192. Support is found at 0.7162, with a stronger floor at 0.7150. The relative strength index shows only modest upside momentum. The outcome of the CPI data will be the primary driver of short-term volatility in the currency pair.
