RBA hike odds rise ahead of CPI as Australian Dollar pulls back from recent peak

• 0.24% is the Australian Dollar's loss on Monday, though it remains above 0.7000 after touching a one-month high.
• Rising expectations of a further Australian interest rate increase could cushion the Aussie's decline.
• Wednesday brings Australian inflation data and the Federal Reserve's monetary policy decision, both closely watched by investors.

0.7015 is AUD/USD's level at the time of writing on Monday, a decline of 0.24% on the day. Earlier in the session, the pair touched a one-month high before pulling back. Investors are taking a cautious approach ahead of this week's major economic events.

Rising expectations that the Reserve Bank of Australia (RBA) will raise interest rates again at its upcoming November monetary policy meeting could underpin the Australian Dollar (AUD).

Recent hawkish remarks by RBA Assistant Governor Sarah Hunter have reinforced those expectations. Warning that inflation was not yet fully under control, she suggested that additional rate increases could be needed, especially given the risk that international inflationary pressures become embedded in Australia's economy.

Australia's Consumer Price Index (CPI), due on Wednesday, is therefore under close scrutiny. An above-forecast reading could strengthen expectations of additional RBA tightening and lend the Australian Dollar further support. A more pronounced easing in price pressures, by contrast, could dampen rate hike expectations and put the currency under pressure.

Lower US Treasury bond yields and hopes of reduced tensions in the Middle East are restraining demand for the US Dollar (USD). The currency is struggling to build on Friday's modest rebound from a three-week low. Geopolitical uncertainty persists, however, leaving scope for a fresh wave of safe-haven demand for the Greenback.

Wednesday's Federal Reserve (Fed) policy decision is another key focus, coming after the two-day Federal Open Market Committee (FOMC) meeting. Investors will scrutinise the central bank's signals on the direction of interest rates.

A busy US data schedule continues on Thursday with the advance estimate of third-quarter Gross Domestic Product (GDP) and the Personal Consumption Expenditures (PCE) Price Index. The latter is a key inflation measure closely tracked by the Fed.

With the contrasting monetary policy outlooks for Australia and the US still in focus, these figures could reset expectations for US interest rates and spark fresh AUD/USD volatility.

November RBA hike risk rises as TD highlights hawkish shift

TD Securities says markets had been “under-priced for the risk of a follow-up hike”. Its earlier commentary after the Minutes of the RBA’s September meeting had nevertheless retained a forecast of no further rate increases this year. Back in the office, TD’s team “listened to the Deputy Governor's fireside chat from last week and there is no confusion here - his comments were hawkish,” signalling a distinct change in tone.

The sequence of the remarks materially alters the policy risk surrounding the next meeting, TD argues. It emphasises that “the Deputy Governor's hawkish comments last week preceded this week's Q3 CPI,” adding that “the timing of this hawkish commentary runs counter to his hawkish commentary in March of this year and earlier last month that were delivered after strong data outcomes.”

For the inflation release, TD Securities “forecast Q3 quarterly trimmed mean to print 0.92% q/q, above the Bank's 0.85% forecast.” The team acknowledges that, “theoretically, this should be enough for the Bank to remain on hold at its November meeting given the Bank's decision to hike at its September meeting.” Its assessment is tempered, however, by the view that “Deputy Governor Hauser's comments detailed above open up the real possibility the Bank uses its updated set of inflation forecasts in its November Statement on Monetary Policy to hike at that meeting.” TD consequently concludes that “odds of the RBA hiking should be above 60% the market has currently priced.”

0.7020 caps AUD/USD: technical outlook

At 0.7018 on the one-hour chart, AUD/USD faces modest near-term resistance. The price remains below both the 100-period simple moving average (SMA) at 0.7020 and the horizontal barrier at 0.7040. Although it holds above the longer-term 200-period SMA at 0.6990, the Relative Strength Index (14) near 41 points to weakening bullish momentum and a corrective bias. The broader uptrend structure remains intact.

Initial downside support lies at 0.7013. Below that, the horizontal floor at 0.6994 and the 200-period SMA at 0.6990 form a key demand zone for buyers to defend. The 100-period SMA at 0.7020 provides immediate resistance, followed by a firmer barrier at 0.7040. A sustained move above both levels would relieve the current selling pressure and clear the way for higher highs on the hourly chart.

(The technical analysis of this story was written with the help of an AI tool. Know more.)