Australian Dollar edges higher as hot CPI inflation and hawkish RBA lift rate hike bets
The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar (AUD) edges higher against the US Dollar (USD) as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia (RBA) rate hikes.
The Australian Dollar (AUD) strengthened to around 0.7035 against the US Dollar (USD) during Asian trading hours on Friday. This rise was attributed to higher than anticipated Australian Consumer Price Index (CPI) inflation data, which increased the likelihood of a rate hike by the Reserve Bank of Australia (RBA). The Australian Bureau of Statistics reported a YoY increase in September's CPI inflation to 4.3%, up from 4.0% in August, surpassing the market's 4.2% expectation.
The RBA's Governor, Michele Bullock, acknowledged that price pressures were beginning to surface. This development bolstered the argument for a rate increase at the upcoming meeting, boosting the probability of an interest hike to 4.85% from 62% before the data release. Previously, the US Federal Reserve kept its federal funds rate in the range of 3.75% to 4%.
The market now anticipates an 80% chance of a hike to 4.85% at the next RBA meeting, compared to 62% pre-data release. The Brown Brothers Harriman strategists noted that the latest Australia inflation data "beat expectations, strengthening the case for another RBA hike and underpinning AUD."
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