Australian dollar surged past $0.667, reaching a two-week high after hotter-than-expected domestic inflation data bolstered bets that the Reserve Bank of Australia (RBA) could raise interest rates again following a hawkish pause in June.
Australia’s Monthly CPI Indicator rose by 4% in May, up from 3.6% in April, and exceeded market expectations of 3.8%. This latest figure marks the highest inflation rate since November of last year, signaling increasing price pressures within the economy. Australian Dollar Surges
RBA Governor Michele Bullock indicated last week that the central bank considered the necessity of a rate hike during their June meeting, while dismissing the possibility of a rate cut. This reinforced the market’s perception of the RBA’s hawkish stance, leading to expectations of potential interest rate increases in the near future.
Consequently, markets have nearly ruled out the possibility of an RBA rate cut this year, with only 43 basis points of total easing anticipated by the end of 2025. The strong inflation data and the central bank’s hawkish tone have prompted investors to adjust their outlook on Australian monetary policy, driving the Australian dollar’s recent appreciation.
In summary, the Australian dollar’s rise past $0.667 is a direct response to stronger-than-expected inflation data and growing expectations of further interest rate hikes by the RBA. As inflation remains a key concern, market participants will closely monitor upcoming economic indicators and central bank communications for further insights on the future direction of Australian monetary policy. Australian Dollar Surges.
