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AUD/USD
Source: Newsmaker.id
The Australian dollar strengthened against several major currencies on Wednesday (October 28), with the AUD/USD pair rising by approximately 0.15%. This gain was driven by Australian inflation data that came in higher than anticipated, leading the market to ramp up expectations that the Reserve Bank of Australia (RBA) may raise interest rates in the near future.
Australia’s monthly inflation rose by 0.8%, exceeding the 0.7% forecast and the previous reading of 0.4%. Meanwhile, inflationary pressure for the third quarter increased by 1.3%, a faster pace than the 0.6% growth recorded in the preceding quarter.
Given these conditions, TD Securities anticipates that the RBA will implement a 25-basis-point rate hike at its meeting next week. This move is expected to mark the final step in the current tightening cycle, with stronger-than-expected inflation serving as the primary catalyst for the RBA to take further action.
On the other hand, the US dollar remains robust ahead of the Federal Reserve’s policy decision. While the US central bank is widely expected to keep interest rates unchanged—with less than a 10% probability of a hike at this meeting—Deutsche Bank suggests that the Fed’s communication will likely remain hawkish, as recent inflation data continues to support the possibility of further tightening.
Newsmaker Analysis: The AUD is finding support from expectations of an RBA rate hike; however, its gains could be capped if the Fed delivers a hawkish signal. Consequently, the trajectory of the AUD/USD pair will largely depend on how the divergence in policy expectations between the RBA and the Fed evolves once both central banks have signaled their respective policy stances. (srh)
Source: Newsmaker.id