AUD/USD Price Forecast: Hawkish RBA bets support rally towards 0.7275
- AUD/USD extends rally to near 0.7185 as the Australian Dollar outperforms its peers.
- A fresh escalation in hawkish RBA bets has strengthened the antipodean.
- Sticky US PCE Inflation report for July offered support to the US Dollar.
The Australian Dollar (AUD) is up 0.2% to near 0.7185 against the US Dollar (USD) during the European trading session on Thursday. The Aussie pair strengthens as hotter-than-projected Australian Consumer Price Index (CPI) data for July has prompted hawkish Reserve Bank of Australia (RBA) prospects.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | 0.03% | 0.02% | 0.06% | -0.20% | 0.01% | 0.03% | |
| EUR | 0.04% | 0.06% | 0.04% | 0.07% | -0.17% | -0.06% | 0.06% | |
| GBP | -0.03% | -0.06% | 0.00% | -0.00% | -0.21% | -0.11% | -0.01% | |
| JPY | -0.02% | -0.04% | 0.00% | 0.02% | -0.20% | -0.13% | 0.01% | |
| CAD | -0.06% | -0.07% | 0.00% | -0.02% | -0.23% | -0.14% | -0.00% | |
| AUD | 0.20% | 0.17% | 0.21% | 0.20% | 0.23% | 0.10% | 0.22% | |
| NZD | -0.01% | 0.06% | 0.11% | 0.13% | 0.14% | -0.10% | 0.15% | |
| CHF | -0.03% | -0.06% | 0.00% | -0.01% | 0.00% | -0.22% | -0.15% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
AUD rallies as hot Australia CPI data boosts RBA hike pricing
Brown Brothers Harriman notes that the Australian Dollar is “outperforming” after hotter-than-expected July inflation data “ran hot, lifting rate hike bets.” The bank highlights that headline CPI “rose 1.0% m/m (consensus: 0.9%) vs. -0.1% in June driven in part by automotive fuel and clothing,” while on an annual basis headline CPI “eased less than expected to 3.5% (consensus: 3.3%) vs. 3.8% in June.”
BBH adds that the underlying trend remains firm, with the “trimmed mean CPI remained at 3.6% (consensus: 3.5%) for a second straight month and tracking above the RBA’s end-December 3.3% forecast.” In response, the bank points out that “RBA cash rate futures now almost fully price a 25bps hike to 4.60% by year-end, up from 60% before the July CPI data.”
Meanwhile, the US Dollar holds onto previous day’s gains, with investors awaiting Federal Reserve (Fed) Chairman Kevin Warsh’s remarks at the Jackson Hole Symposium on Friday.
The US Dollar gained on Thursday after the release of the United States (US) Personal Consumption Expenditure (PCE) Price Index report for July, which showed that price pressures remained sticky.
AUD/USD Technical Analysis
AUD/USD trades at 0.7185. The pair holds a bullish near-term bias as it advances firmly above the 20-day exponential moving average (EMA) at 0.7100, keeping recent gains supported by underlying trend demand.
The Relative Strength Index (14) at 69.2 hovers just below overbought territory, suggesting strong but potentially stretched upside momentum after the latest leg higher.
On the downside, initial support is located at the 20-day EMA at 0.7100, which marks the nearest pullback floor if buyers take profits or momentum cools. Looking up, the pair aims to rally further towards the four-year high at 0.7276.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
