top of page
  • Writer's pictureChris Broadfoot

Australian Dollar Steady Despite Surging Inflation: Analysing the RBA's Potential Rate Hike.

Overall whilst we have seen a lot of news released this week, the rates have ended up staying in a very tight range.

The AUD against the GBP, USD, EUR have all traded off the news, however, the rates are sitting basically where they were at this point last week.

The Australian dollar has had an eventful week, influenced primarily by higher-than-expected inflation data. On Wednesday, Australia’s monthly Consumer Price Index (CPI) for May was reported at 4%, surpassing the forecast of 3.8% and the previous month's figure of 3.6%.

This unexpected rise has intensified discussions around the Reserve Bank of Australia (RBA) potentially raising interest rates again in the near future, with market-implied expectations now placing the likelihood of a rate hike in August at 35%, and 54% by September.

Australian dollar to US dollar exchange rate

In response to the inflation news, the Australian dollar rallied but continued to trade within a narrow range. The AUD/USD pair has remained in the 0.6575-0.6725 zone since May. Although the recent inflation data boosted Australian bond yields and narrowed the yield gap between the US dollar and the Australian dollar, it did not significantly alter the trading range. Analysts attribute this to several factors, including the Federal Reserve's indications of only one rate cut in 2024 and the declining prices of key commodities like iron ore and copper, which have subdued bullish sentiment for the AUD.

The US dollar has shown signs of weakening this week, driven by a mix of economic factors. Lower-than-expected inflation and disappointing jobless claims have pushed the dollar towards its lowest level since early September. The US dollar index slipped lower after the latest batch of US data showed economic activity slowing down.

This decline is attributed to falling US Treasury yields and market expectations now lean towards the Federal Reserve maintaining interest rates unchanged in the near term, adding pressure on the US dollar.​ 

The GBP and EUR have also seen a quiet week, with not much change at all in rates, all trading in a very tight 0.5% range.

1 view0 comments


bottom of page