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11/07/24
167
AUD At 6-Month High as Inflation Expectations Edge Down
On Thursday, the US dollar was broadly weaker against other major currencies and the Australian dollar took full advantage.
In July, AUD/USD rose 1.51% and the Australian dollar is at its highest level since Jan. 3. AUD/USD traded at about 0.6741, up 0.32% for the day in the North American session.
Australia’s inflation expectations were surprisingly low in July and dipped to 4.3%. That was slightly lower than June’s gain of 4.4% and lower than the 4.5% market forecast. Inflation expectations are however still much too high for the liking of the Reserve Bank of Australia, whose inflation target band is between 2% and 3%.
Inflation expectations are monitored carefully as it is seen as a predictor of consumer price inflation. The Reserve Bank of Australia has warned that it will be a bumpy inflation road and the CPI surprised by rising to 4.0% from 3.6%, higher than the 3.8% market estimate and the highest level this year.
The RBA is still hawkish mood and considered hiking interest rates at the past two meetings, although policymakers held rates at 4.35% both times. The central bank is still worried about high inflation, especially services inflation which rose 4.3% in Q1. The RBA will not likely hike rates at the August meeting.
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