FX.co ★ Australian Dollar Set for 2nd Monthly Gain

The Australian dollar traded just below $0.72, hovering near its highest level since early June and heading for a second consecutive monthly gain, as markets increasingly anticipated an imminent interest rate hike. Investors are now assigning a 52% probability that a fourth rate increase this year could come as early as next month, up sharply from 17% previously, while a move in November is fully priced in.

Expectations for tighter policy strengthened following a hotter-than-expected July inflation reading and robust household spending data, prompting several major banks to revise their outlooks. NAB now sees a possible hike at the September 29–30 meeting, while CBA and ANZ continue to forecast a move in November but acknowledge the risk of earlier tightening.

At the same time, the US dollar strengthened broadly after Federal Reserve Chair Kevin Warsh delivered a hawkish debut speech at the Jackson Hole symposium last week, stating that policymakers may need to take further action if inflation remains elevated.