The Australian dollar climbed back above $0.71, erasing a roughly 0.3% decline from the previous week and hovering near four-year highs, as surging energy prices reinforced expectations of further interest rate increases ahead of key inflation data this week.
While a ceasefire has largely held since early April, efforts to revive peace talks between the US and Iran have stalled, and energy shipments through the Strait of Hormuz remain constrained. This ongoing disruption to energy supply continues to stoke inflationary pressures, bolstering the view that central banks will either keep interest rates elevated for an extended period or implement additional hikes.
In Australia, investors are focused on Wednesday’s release of the March CPI report, with headline inflation forecast to rise 4.7% year-on-year, well above the Reserve Bank of Australia’s 2–3% target range. Any upside surprise could cement expectations of a 25-basis-point rate increase at the RBA’s 5 May meeting. Futures markets currently imply an 80% probability of a third rate hike this year, which would take the cash rate to 4.35%.
