Australian Dollar surges broadly today following reacceleration in monthly inflation data, sparking speculation that RBA might need to raise interest rates again. The inflation uptick places significant pressure on RBA to not only refrain from cutting rates anytime soon but potentially consider further rate hikes.
RBA’s upcoming meeting in August is now seen as being “live,” although a decision is not yet certain. The critical factor remains Q2 CPI report due on July 31, which will provide further clarity on the inflation outlook, will heavily influence RBA’s policy decision.
Strength of Aussie is particularly noticeable against Kiwi. AUD/NZD’s rally from 1.0730 resumed and hits as high as 1.0917 so far. The development solidifies that case that pull back from 1.1027 has completed at 1.0730, after hitting 61.8% retracement of 1.0567 to 1.1027.
Further rise is expected as long as 1.0846 support holds. Next target is the key resistance zone of 1.1027/1085. Decisive break there will resume whole medium term rebound from 1.0469 (2022 low). However, for this bullish scenario to unfold, RBA would need to actually implement additional tightening, rather then just keeping the option open..
