Aussie rallies after hot inflation data

The Australian dollar strengthened broadly in Asian trading on Wednesday against a basket of global currencies, hitting its highest level in about a week versus the US dollar, following the release of hot inflation data from Australia.

The data showed renewed inflationary pressures on policymakers at the Reserve Bank of Australia, which lowered the likelihood of an interest rate cut at next week’s meeting.

Price Overview

• AUD/USD today: The Australian dollar rose 0.4% to 0.6623, the highest in about a week, up from the session’s opening at 0.6597, after touching a low of 0.6589.

• The Australian dollar ended Tuesday flat against the US dollar, after gaining 0.1% the previous day in a recovery move from a two-week low at 0.6575.

Australian Inflation

The Australian Bureau of Statistics reported Wednesday that the overall Consumer Price Index rose by 3.0% year-on-year in August, the fastest pace since July 2024, above market forecasts of 2.9%, compared to 2.8% in July.

The figures confirm that inflation has accelerated back out of the RBA’s 2%–3% medium-term target band, reducing the likelihood of an additional rate cut this year.

Views and Analysis

• Tony Sycamore, IG Markets: “Today’s inflation update suggests the RBA will maintain a cautious approach to its easing cycle. September is off the table, but November remains in play.”

• Russel Chesler, VanEck: “The recent uptick in inflation, combined with continued labor market strength, reinforces our view that another rate cut is unlikely before November.”

Australian Interest Rates

• Following the inflation data, market pricing for a 25 basis-point rate cut by the RBA in September dropped from 25% to just 5%.

• RBA Governor Michele Bullock said Monday that the Australian economy is in good shape, with inflation expected to return to the middle of the 2%–3% target range and the labor market close to full employment.