• The Australian Dollar strengthens after higher-than-expected inflation figures in Australia.
• Markets reinforce expectations of an interest rate hike by the RBA as early as the next meeting.
• The US Dollar finds some support after comments reaffirming the US commitment to a strong currency.

AUD/USD trades around 0.7050 on Thursday at the time of writing, up 0.25% on the day, extending a positive momentum fueled by renewed optimism surrounding monetary policy in Australia.

The pair is supported by the release of firmer-than-expected Australian inflation data, which strengthens the case for an imminent monetary tightening by the Reserve Bank of Australia (RBA). Markets now estimate the chance of a 25-basis-point rate hike at more than 70% as early as the next meeting, according to ASX’s RBA Rate Tracker tool. This rapid repricing of rate expectations is supporting the Australian Dollar (AUD) by improving its relative attractiveness against major currencies.

The published figures show an acceleration in both headline and underlying inflation, confirming that price pressures remain persistent. This situation complicates the task of the Australian central bank, which must deal with inflation still well above its target, at a time when economic activity and domestic demand remain resilient. The rise in export and import prices in the latest quarter also reinforces the view that inflationary pressures are not limited to temporary factors.

On the US side, the upside potential in AUD/USD is partly capped by renewed support for the US Dollar (USD). US Treasury Secretary Scott Bessent reaffirmed Washington’s commitment to a strong US Dollar policy, while the Federal Reserve (Fed) kept interest rates unchanged at its latest meeting. Fed Chair Jerome Powell emphasized that the institution remains data-dependent, against a backdrop of still-solid growth and elevated inflation.

Overall, the AUD/USD pair remains primarily driven by shifts in Australian monetary policy expectations. As long as markets continue to bet on imminent action from the Reserve Bank of Australia, the Australian Dollar is likely to retain a constructive bias, despite an international environment still marked by uncertainty over the future path of US interest rates.