Above 0.7050: Australian Dollar ticks up as hot CPI boosts RBA rate hike expectations

• 0.7055 is in view as AUD/USD edges up in Thursday’s Asian session.
• An 82% probability of an RBA rate hike followed stronger-than-expected CPI figures.
• Wednesday’s Fed decision left the benchmark interest rate unchanged, with Warsh giving no clear signal on December.

0.7055 is within reach as AUD/USD strengthens in Thursday’s Asian trading. Higher-than-expected inflation has reinforced expectations of Reserve Bank of Australia (RBA) rate hikes, lifting the Australian Dollar (AUD) against the US Dollar (USD). Attention later on Thursday turns to the US September Personal Consumption Expenditures (PCE) inflation report.

At 4.3% YoY in September, Australia’s headline Consumer Price Index (CPI) exceeded the 4.2% market consensus and August’s 4.0% reading. The Australian Bureau of Statistics released the figures on Wednesday. Monthly CPI inflation also picked up, reaching 0.8% in September from 0.4% previously.

The inflation release has strengthened the argument for an RBA rate increase at the forthcoming meeting, lending support to the Aussie. According to the ASX RBA Rate Tracker, markets now assign nearly an 82% probability to a rise in interest rates to 4.85% at the next RBA Board meeting. That compares with 62% before the release.

As widely anticipated, the US Federal Reserve (Fed) left its benchmark interest rate at 3.75%-4.00% on Wednesday. Its statement presented a stronger assessment of the economy while recognising that inflation “remains elevated.”

Fed Chairman Kevin Warsh declined to provide guidance on the outlook at the press conference. He did, however, acknowledge that price stability had yet to be achieved. Warsh said: "We're working on it," while the CME FedWatch tool put traders’ expectations of a December hike at 78%.

Carol Kong, a currency strategist at Commonwealth Bank of Australia, said: "Warsh's silence on further rate hikes was interpreted as dovish, or not hawkish enough,"

4.3% Australian inflation strengthens RBA hike case, lifts Aussie

The latest Australian inflation figures “beat expectations, strengthening the case for another RBA hike and underpinning AUD.” That is the assessment of strategists at Brown Brothers Harriman. They observe that September headline CPI “rose 4.3% y/y (consensus: 4.2%) vs. 4.0% in August reflecting rising housing and transport costs,” keeping price pressures above the central bank’s expectations.

According to BBH, “inflation is materially worse than the RBA assessed in August, when it forecast year-end headline CPI at 3.6% and trimmed mean at 3.3%.” The strategists conclude that “this argues for additional tightening,” noting that RBA cash rate futures have “raised odds of a 25bps hike to 4.85% on November 3 from 60% to 85%, and increased bets on another hike in Q1.”

Turning to underlying inflation, BBH notes that “trimmed mean CPI matched consensus at 3.6% y/y up from 3.5% in August.” The strategists nevertheless stress that “the policy-relevant Q3 trimmed mean CPI ran hot at 3.7% y/y (consensus: 3.6%) vs. 3.6% in Q2,” supporting the assessment that underlying price pressures remain uncomfortably high for the RBA.

5.6/10 Warsh speech score: investment optimism, AI risks and no rate commitment

At 5.6/10, Fed Chair Warsh’s FXS Speechtracker score sits modestly below the historical average of 6.1/10. The reading signals caution despite positive remarks on structural growth and a surge in investment. His reference to being “over-scarred from the global financial crisis” highlights an enduring awareness of risk that moderates his optimism. Repeated refusals to prejudge the October and December meetings leave the rate outlook deliberately unclear, even as he identifies AI and investment as major sources of upside. The overall message balances support for continued growth and AI-led productivity gains against financial stability concerns and tail risks. That balance offers little fresh hawkish impetus for the Dollar.

With a move of 0.00 points, the FXS Fed Sentiment Index remained elevated at 127.51. The unchanged reading indicates that perceptions of the policy stance stayed firmly hawkish, although the speech provided no additional tightening signals. Taken together with the slightly below-baseline FXS Speechtracker score, it suggests that the Dollar retained its existing hawkish premium without receiving meaningful reinforcement from Warsh’s appearance.

100-day SMA supports AUD/USD’s bullish bias: Technical Analysis

Trading above the 100-day simple moving average (SMA) and the Bollinger middle band, AUD/USD retains a modestly bullish short-term outlook on the daily chart. Those levels point to a constructive underlying trend following the recent rebound from below 0.70. At 57, the Relative Strength Index (RSI) remains positive but below overbought territory, signalling improving upside momentum without signs of overstretching.

The Bollinger upper band near 0.7065 provides the first resistance, with the advance beginning to encounter selling pressure there. Initial downside support lies at the 100-day SMA of 0.7035, ahead of the Bollinger middle band around 0.6990. A more pronounced retreat would likely attract stronger buying interest towards the lower Bollinger band near 0.6915.

(The technical analysis of this story was written with the help of an AI tool. Know more.)