The Australian Dollar has gained over 6% since the start of the year, making it the best performer among G10 currencies. Market expectations for the Reserve Bank of Australia to raise interest rates have increased, with a probability of over 60% for a hike next Tuesday. However, caution is advised as recent positive data may not fully support the anticipated rate hikes, report Commerzbank analysts Volkmar Baur and Michael Pfister

RBA rate hike expectations rise

"One reason for this is that the market now expects the Reserve Bank of Australia to raise interest rates as early as next Tuesday, with a probability of over 60%."

"However, we remain sceptical. One reason why the market is now pricing in significantly more interest rate hikes is not least the positive data."

"Overall, this should only have a slight negative impact on the AUD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)