Australian Dollar Weakens, Markets Begin to Doubt Interest Rate Hike
The Australian dollar (AUD) is hovering around $0.668, hovering near its weakest level in two weeks. The market is still weighing whether the Reserve Bank of Australia (RBA) will actually raise interest rates as early as February.
The probability of a 25 bps rate hike in February is now estimated at around 27%, down from nearly 40% last week. However, the market still sees a higher chance of a rate hike in the next period—with a roughly 76% chance of a hike no later than May.
Several recent data points have made market participants hesitant. November inflation softened slightly and consumer confidence declined, diminishing confidence in a quick rate hike. Meanwhile, job openings fell slightly by 0.2% in the November quarter, suggesting that labor demand remains stable—not hot, but not sharply weakening either.
On the other hand, strong household spending in November could act as a buffer against falling inflation. If consumption remains strong, price pressures could persist for longer—and this could revive expectations of a tighter RBA stance.
Therefore, the direction of the AUD and the RBA's decision now depend heavily on two key data points: the fourth-quarter CPI release due later this month, and the December jobs report next week. If Q4 core inflation is higher than expected, pressure for a faster interest rate hike could intensify.
5 Key Points:
- AUD at $0.668, near a two-week low.
- The probability of a February rate hike has dropped to 27% (from -40% last week).
- The market still sees a 76% chance of a rate hike no later than May.
- Mixed data: inflation softened and confidence declined, but household spending is strong.
- Next key determinants: Q4 CPI at the end of the month and December jobs data next week. (asd)
Source: Newsmaker.id
