Markets price in a potential Reserve Bank of Australia rate increase after July inflation data exceeded expectations.
AUD/USD climbed to around 0.7180 in Asian trading Thursday, extending gains for a third day. The Australian Dollar’s strength persists despite a 3.6% drop in Q2 private capital expenditure, missing forecasts of no change following a 6.5% prior gain.
Expectations for an RBA rate hike surged after July inflation data signaled persistent price pressures. Major banks revised their forecasts, with NAB predicting a September increase to 4.6%, while Commonwealth Bank and ANZ eye November. The RBA held rates at 4.35% in August but warned of further tightening if inflation risks escalate.
Australia’s leading economic index improved slightly in July, rising to -0.2% from -0.4% in June, suggesting soft but not weak growth.