AUD Gains on Strong July CPI, RBA Hike Outlook Tightens

The Australian dollar climbed 0.2% to 0.7185 against the U.S. dollar during Thursday’s European session, buoyed by July consumer‑price data that exceeded expectations and stoked expectations of a rate rise from the Reserve Bank of Australia (RBA).

July’s headline CPI rose 1.0% month‑over‑month—surpassing the 0.9% consensus—and 3.5% on an annual basis, a modest lift from June’s 3.8% and above the 3.3% forecast. The underlying trend remained firm, with the trimmed‑mean CPI holding steady at 3.6% for a second month, comfortably above the RBA’s end‑December 3.3% projection. In response, cash‑rate futures now almost fully price a 25‑basis‑point hike to 4.60% by year‑end, up from a 60% probability before the CPI release.

The U.S. dollar, meanwhile, kept its gains ahead of Federal Reserve Chair Kevin Warsh’s upcoming remarks at the Jackson Hole Symposium, following a July PCE price‑index report that confirmed sticky inflation.

On the technical front, AUD/USD sits at 0.7185, comfortably above its 20‑day exponential moving average of 0.7100 and supported by a Relative Strength Index of 69.2, just shy of overbought levels. A pullback to the 0.7100 EMA would represent the nearest downside risk, while a rally toward the four‑year high of 0.7276 remains a realistic target.

The RBA’s mandate—to maintain price stability, support full employment and foster economic prosperity—continues to guide its policy decisions, with the recent CPI reading sharpening expectations of a tightening stance in the near term.