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The RBA dream of cutting interest rates shatters! Inflation explodes, the Australian dollar has risen strongly to start a counterattack
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Hello everyone, today XM Foreign Exchange will bring you "[XM official website]: The dream of the RBA cuts interest rates shattered! Inflation explodes, the Australian dollar has risen strongly and starts a counterattack." Hope it will be helpful to you! The original content is as follows:
Official data on Wednesday (September 24) showed that Australia's consumer price index rose 3% year-on-year in August, the highest increase in a year, exceeding market expectations of 2.9%, and hitting the upper limit of the RBA's 2-3% target range. Driven by soaring electricity prices, housing costs became the main contributor, while the year-on-year increase of the cut-off average indicator slowed to 2.6%.
This result, together with recent tight labor market data, reinforces market expectations: the RBA may keep interest rates unchanged at its September 30 meeting and postpone the rate cut schedule. The interest rate swap market shows that the probability of interest rate cuts in November has dropped to 55%.
Instant market reaction: Australian dollar and Treasury bond yields rose both times
After the data was released, the Australian dollar/USD rose significantly, once rising 0.45% to 0.6627. Currently trading around 0.6615, the yield on policy-sensitive three-year Treasury bonds rose simultaneously. The market has sharply cut its bets on the recent RBA interest rate cuts, and the Barrenjoey Markets economist JoMasters team therefore revoked its forecast for the November rate cut and pointed out that "inflation pressure is accelerating across the board."
Masters said: "There is significant uncertainty in the current interest rate cut path. It is expected that there may be a 25 basis point interest rate cut in the first half of 2026, but the specific timing remains to be seen."
Australia/USD analysis: Although the US dollar remains stable, the Australian dollar continues to rise
The US dollar index rose slightly during the day on Wednesday. However, the US S&P global PMI data released on Tuesday put pressure on the dollar.
US S&P SeptemberThe global xn--xm-6d1dw86k.comprehensive PMI fell to 53.6 from 54.6 in August, indicating that the growth momentum of private sectors may be difficult to further strengthen. The manufacturing PMI fell from 53.0 to 52.0, indicating that the momentum in the field was weakened; the service PMI fell from 54.5 to 53.9, suggesting that demand may be slowing.
Feder Chairman Powell said Tuesday that weak labor markets have surpassed concerns about inflation stickiness, prompting the Fed to decide to cut interest rates at its September meeting last week. But he also stressed that he was satisfied with the current policy path, but if the Federal Open Market xn--xm-6d1dw86k.committee believes that further easing is needed, there is still a possibility of continuing interest rate cuts.
Cleveland Fed Chairman Beth Hamak warned Monday that inflationary pressures may continue in the near term, noting that the Fed faces challenges in its dual mission of controlling inflation and supporting the labor market. Richmond Fed Chairman Thomas Balkin pointed out on the same day that tariff policies often lead to higher prices for consumers, and stressed that the main concern of xn--xm-6d1dw86k.companies at present is still vague trade policies rather than high interest rates.
Technical Analysis
Daily chart shows that the Australian dollar/USD has touched the lower track of the upward channel, indicating that bullish momentum has rebounded. The 14th-day Relative Strength Index (RSI) remained above the 50 level, suggesting that bullish sentiment remains.
On the upward trend, the Australian dollar/USD is testing the lower track of its upward channel near its recent resistance level 0.6625. If the price rebounds back into the channel, it will consolidate the momentum of short-term upward trend and push the exchange rate to approach the 11-month high of 0.6707 set on September 17, and then challenge the upper track of the channel near 0.6730.
In the downward trend, the initial support level of the Australian dollar/USD reached the key psychological threshold of 0.6600, and the support below coincides with the 50-day exponential moving average (EMA) of 0.6552. If it falls below this support point, it will weaken the momentum of the medium-term upward trend, and the exchange rate may fall to the three-month low of 0.6414, which was hit on August 21.
Monthly inflation indicators will be fully implemented
RBA Chairman Brock recently emphasized that the policy will be adjusted based on "economic evidence that meets or is stronger than expected." Although she admitted that monthly CPI was volatile, strong data for two consecutive months had weakened the urgency of rate cuts.
National Australian Bank strategist Rodrigo Catril pointed out: "Details of housing and services inflation still pose upside risks, and today's data provides the basis for the RBA to suspend interest rate cuts in November."
From November 26, the Australian Bureau of Statistics will release a xn--xm-6d1dw86k.complete monthly inflation indicator to fill the long-term data gap and keep the country in line with the statistical standards of most developed economies. However, during the transition period, quarterly data will still be used as a reference benchmark for core policies.
The above content is all about "[XM official website]: The dream of a RBA rate cut is shattered! Inflation is exploding, the Australian dollar has strongly lifted and started a counterattack". It was carefully xn--xm-6d1dw86k.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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