The Australian dollar traded above $0.71, hovering near a twelve-week high as broad-based weakness in the US dollar continued to lend support. The Aussie gained 1.2% last week, extending its longest weekly winning streak since 2020, with the greenback under pressure amid concerns about US fiscal policy and the effectiveness of Treasury debt buybacks.
Investors are now focused on Australia’s July inflation data, due Wednesday, for guidance on the Reserve Bank of Australia’s next policy steps. The RBA left its cash rate unchanged at 4.35% this month, but Deputy Governor Hauser signaled that further rate hikes remain possible if inflation risks tied to the Middle East conflict, AI-related investment, and weak productivity materialize.
Signs of a softer labor market have curbed expectations for additional tightening, yet markets still assign roughly a 60% probability to a rate hike by year-end, with a move in February about 68% priced in. At the same time, investors are closely watching geopolitical developments in the Middle East, as the US is expected to announce new sanctions against Iran.
