Australian Inflation Hot, What's Next for the RBA?
The Australian dollar (AUD) strengthened against the US dollar (USD) on Thursday, extending its gains into a fifth consecutive session. The AUD/USD pair was boosted by a weakening greenback amid growing confidence that the Federal Reserve will cut interest rates at its December meeting. Expectations of a rate cut in the US made the AUD more attractive compared to the USD in the eyes of market participants.
Domestically, positive sentiment for the AUD came from the release of stronger-than-expected economic data. The Australian Bureau of Statistics (ABS) reported that private capital expenditure rose 6.4% quarter-on-quarter in the third quarter, up from 0.2% in the previous quarter and well above expectations of 0.5%. The day before, the ABS also released the first "full" monthly consumer price index (CPI), which rose 3.8% year-on-year in October, surpassing the 3.6% projection and above the previous 3.5% increase. This combination of data reinforces the view that price pressures in Australia remain quite strong.
These conditions have led the market to believe the Reserve Bank of Australia (RBA) is likely to hold its benchmark interest rate at 3.6% at its December meeting, given that inflation remains above its 2-3% target. RBA officials acknowledged that unemployment has risen slightly but assessed the labor market as remaining healthy. The ASX 30-Day Interbank Cash Rate Futures contract as of November 26 only showed a 6% chance of a rate cut to 3.35%, confirming that the market is more inclined to view the RBA as remaining subtly hawkish, while also providing additional support for the strengthening of the AUD. (az)
Source: Newsmaker.id
