Australian Dollar climbs on RBA rate hike expectations as traders await US CPI

  • The Australian Dollar advances on Friday as markets strengthen expectations of further interest rate hikes in Australia.
  • Investors see a 72% chance of a rate hike at the Australian central bankโ€™s next meeting.
  • Stronger-than-expected producer inflation in the US keeps Fed tightening expectations elevated ahead of CPI data.

AUD/USD advances 0.17% on Friday and trades around 0.7170 at the time of writing. The Australian Dollar (AUD) benefits mainly from growing expectations of further interest rate hikes by the Reserve Bank of Australia (RBA), following a series of hawkish comments from central bank officials.

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RBA Assistant Governor Sarah Hunter said on Tuesday that the central bank may need to raise interest rates again if inflation proves more persistent than expected. Her comments therefore keep the possibility of another rate hike at the September meeting alive.

RBA Deputy Governor Andrew Hauser also struck a hawkish tone, saying that inflation remains โ€œone big problemโ€ for the Australian economy. He added that the central bank stands ready to raise interest rates further if such action becomes necessary.

Against this backdrop, markets now see a 72% chance that the RBA will raise its Official Cash Rate (OCR) to 4.6% at its next meeting, up from 54% at the beginning of the month, according to the RBA Rate Tracker. This repricing of the interest rate outlook supports the Australian Dollar and contributes to the advance in AUD/USD.

On the US side, the Producer Price Index (PPI) rose 5.4% YoY in August, up from 4.8% previously and slightly above the 5.3% market consensus, according to data released on Thursday by the Bureau of Labor Statistics (BLS). On a monthly basis, the PPI increased 0.4%, in line with expectations, while the core index rose 0.2%, slightly less than forecast.

The firmer inflation data also reinforce expectations of monetary tightening in the United States (US). According to the CME FedWatch tool, markets see a near 70% chance of a 25-basis-point interest rate hike by the Federal Reserve (Fed) at its next meeting.

Attention now turns to the US Consumer Price Index (CPI), due later on Friday, the final major inflation release before the Fedโ€™s monetary policy decision next week. Markets expect the headline index to rise 3.4% YoY in August, while core inflation is forecast to increase 2.4%. A surprise in the data could alter US interest rate expectations and determine the next directional move in AUD/USD.

AUD/USD technical analysis

Chart Analysis AUD/USD


In the one-hour chart, AUD/USD trades at 0.7171, holding a capped tone as it remains below both the 100-period and 200-period simple moving averages (SMAs) at 0.7206 and 0.7192 respectively. The pair is attempting to stabilize after breaking above a descending channel, now offering a resistance line around 0.7162, yet the sub-50 reading of the 14-period Relative Strength Index near 46 still hints at only modest upside momentum while broader pressure persists underneath the clustered moving-average ceiling.

On the topside, immediate resistance emerges at 0.7176, where a horizontal barrier precedes the 200-period SMA at 0.7192 and the higher 100-period SMA near 0.7206, collectively forming a dense supply zone that would need to give way to ease the current cap. On the downside, initial support is seen at the reclaimed trend line around 0.7162, with a more important floor at the horizontal level of 0.7150, where a break lower would likely reopen the path toward deeper hourly losses.

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