The Australian dollar rose to nearly $0.67 on a hot CPI inflation reading

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Vrasidas Neofytou
Head of Investment Research

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The Australian dollar rose to nearly $0.67 on a hot CPI inflation reading

The Australian dollar drifted higher toward the key $0.67 resistance level on Wednesday morning, tracking a surprise rise in Australian CPI inflation reading for May, which ramped up concerns over higher interest rates by the RBA.

Australian CPI inflation accelerated to a six-month high of 4% year-to-year in May, up from 3.6% in April and well above market forecasts of 3.8%. (Source: www.investing.com

Meanwhile, the Core CPI inflation (which excludes volatile energy and food) climbed to an annual rate of 4.4%, also its highest level in six months and up from 4.1%.

The Aussie gained almost 0.50% against major peers as the hot inflation reading lifted expectations among investors that the RBA-Reserve Bank of Australia could potentially hike interest rates in its next monetary meeting in August.

May’s CPI reading indicated inflation is moving further away from the RBA’s 2% to 3% annual target range- a scenario that is likely to invite more hawkishness from the central bank.

While the Royal Bank of Australia has not explicitly mentioned the possibility of a rate hike, it did strike a more hawkish tone than markets were expecting at a meeting last week, dragging AUD higher across the board.

 

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