The Australian dollar held above $0.71, hovering near its highest level in more than three months, as robust economic growth increased the likelihood of an imminent interest rate hike while investors assessed the latest trade data. Australia’s goods trade surplus narrowed to A$1.9 billion in July from a revised A$2.3 billion in June, but still exceeded market expectations of A$1.45 billion. The decline was largely driven by weaker gold exports and higher fuel imports.
At the same time, recent figures showed the economy performed better than expected in the second quarter, reinforcing expectations that the Reserve Bank of Australia could resume tightening after raising rates three times already this year. Following the GDP release, markets lifted the probability of a rate increase this month to 58%, up from 49%, while a move in the cash rate to 4.60% by November is now fully priced in. The increasingly hawkish policy outlook has been further supported by renewed fighting in the Gulf, which pushed oil prices higher and stoked fresh concerns about inflation.
