Aussie Holds Near 10-Week Top

The Australian dollar held above $0.71, staying near a ten-week high as a broadly weaker US dollar and improving domestic economic sentiment supported the currency. The greenback came under pressure as softer-than-expected US economic data prompted traders to trim the odds for further Federal Reserve rate hikes, raising concerns about US economic growth and the dollar’s yield advantage. The Aussie also drew support from improving domestic sentiment after the Reserve Bank of Australia held its interest rate at 4.35% following three hikes earlier in the year. Australian consumer confidence improved to a nine-month high in August, adding to expectations that the economy remains resilient. Markets are now focused on Thursday’s jobs report, with employment expected to rise by 15,000 in July after a strong 76,300 increase in June, while unemployment is forecast to remain at 4.4%. Quarterly wages data are also due on Wednesday, while RBA Deputy Governor Andrew Hauser will also be speaking.

The Australian dollar rose above $0.71, hitting a ten-week high as the Reserve Bank maintained a hawkish policy stance, while the US dollar weakened as Fed rate hike bets faded amid softer US economic data. Recent figures pointed to subdued US inflation, while consumer sentiment and retail sales also weakened. Markets now price roughly a one-in-three chance of a September rate hike, down from nearly 50% before the latest data. In Australia, the RBA held its cash rate at 4.35% for a second consecutive meeting last week, but Governor Michele Bullock said rates might need to rise again as the Strait of Hormuz remained closed and productivity growth stayed weak. RBA Assistant Governor Christopher Kent also said tighter monetary policy was working as designed, although its full effects on activity and inflation would take time. Markets now price around a 70% chance of one final move to 4.60% by early next year. Meanwhile, Australia’s July employment report will be in focus on Thursday.

The Australian dollar held above $0.705, staying near multi-week highs as the Reserve Bank’s latest remarks reinforced a restrictive policy stance. RBA Assistant Governor Christopher Kent said earlier rate increases were working as intended, with tighter monetary conditions weighing on consumer spending and slowing broader economic activity. He noted that housing credit growth had slowed, with a noticeable decline in new home lending, and said financial conditions overall remained somewhat restrictive. The central bank kept its cash rate at 4.35% this week after raising it by 75 basis points since February. However, Governor Michele Bullock said policymakers remained concerned that inflation may not cool as hoped and were prepared to raise rates again if needed. Markets priced around a 54% chance of a hike to 4.60% by December, likely marking the end of the tightening cycle. Attention now turns to Governor Michele Bullock, who is due to testify before parliament on Friday.