FX.co ★ Aussie Hits 3-Month Top on Hot CPI Data

The Australian dollar climbed toward $0.72, reaching a twelve-week high after hotter‑than‑expected July inflation data increased the risk of another interest rate hike. Monthly CPI rose 1.0% in July from June, beating forecasts for a 0.8% gain, while annual inflation eased to 3.5% from 3.8% but remained above the 3.3% consensus.

The trimmed mean measure of core inflation advanced 0.5% on the month, exceeding expectations of 0.3% and leaving annual underlying inflation at 3.6%. The stronger‑than‑anticipated figures follow repeated warnings from the Reserve Bank of Australia that inflation is still too high and that risks are skewed to the upside.

The RBA has already raised interest rates three times this year in an effort to bring inflation back to target, and Governor Michele Bullock said after the latest meeting that another increase was “quite possible.” Money markets have now lifted the implied probability of a rate hike next month to 27% from 17%, while the odds of a move by February next year are now priced at 80%.