Australian Dollar climbs to one-month high on hawkish RBA stance

• A fourth successive daily gain takes the Australian Dollar to its strongest level since late September.
• Expectations of a further interest rate increase strengthen after hawkish remarks from Australian central bank officials.
• Despite support for the US Dollar from geopolitical tensions and prospects of tighter US monetary policy, the pair continues to climb.

A 0.42% daily gain brings AUD/USD to around 0.7025 at the time of writing on Wednesday. Now advancing for a fourth consecutive day, the pair has set a fresh one-month high, having rebounded last week from below 0.6900, its weakest level since July. Hawkish remarks from several Reserve Bank of Australia (RBA) officials are the main source of support for the Australian Dollar (AUD), bolstering expectations of additional monetary tightening.

Several factors point to rising neutral interest rates in Australia and worldwide, RBA Assistant Governor Christopher Kent said on Monday. His remarks have encouraged speculation that Australian monetary policy may stay restrictive for longer than previously anticipated.

Underlying inflation, as measured by the trimmed mean, could also surpass third-quarter expectations, RBA Deputy Governor Andrew Hauser warned on Wednesday. The prospect adds to expectations of a possible interest rate increase at the next monetary policy meeting on 3 November.

Better-than-expected third-quarter Gross Domestic Product (GDP) in China is providing further support for the Australian Dollar. The encouraging figures from Australia's largest trading partner ease worries about growth in the world's second-largest economy and bolster the outlook for demand for Australian exports.

Although several factors underpin the US Dollar (USD), they have done little to contain the rise in AUD/USD. Prospects of renewed peace talks between the United States and Iran dampen demand for safe havens, but continuing uncertainty in the Middle East leaves investors cautious.

Friday's preliminary global Purchasing Managers Index (PMI) releases are the next focus for investors, before the Federal Open Market Committee (FOMC) holds its monetary policy meeting next week.

Hawkish RBA remarks raise rate hike expectations as AI trade wobble tempers Australian Dollar support

Following hawkish comments by RBA Deputy Governor Andrew Hausner, the Australian rates market “has moved overnight to price in a higher probability of another RBA rate hike before the end of this year”, MUFG analysts note. Describing the inflation outlook as “materially worse” than the RBA’s August forecasts, Hausner highlighted that “we’re seeing higher AI prices, tech prices feeding through into CPI…and we’re having a boom in data centre construction here in Australia as well, so that’s upside too, and then on domestic capacity pressure.”

A further concern, he said, was that “inflation has been high for a very long time now, and we are beginning to see some signs that people in the community are not sure if we’re going to bring inflation back to target, or certainly not for an extended period.” Market participants have responded to the hawkish remarks by moving to “price in closer to a 50:50 probability of another RBA hike next month.”, according to MUFG.

While the Australian Dollar “has underperformed recently alongside the wobble for AI-related trades.”, MUFG adds that higher Australian yields have “encouraged a stronger Australian Dollar this year,”

AUD/USD maintains constructive technical bias

At 0.7028 on the one-hour chart, AUD/USD remains above both the 100-period simple moving average (SMA) at 0.6975 and the 200-period SMA at 0.6973. The near-term outlook stays constructive as long as the pair holds rising trend-line support around 0.7018. With the price consolidating just below immediate resistance, a Relative Strength Index (14) reading near 60 points to steady bullish momentum rather than overbought conditions.

The horizontal barrier at 0.7040 marks initial resistance; a sustained move above it would clear the path for additional intraday gains. Support lies first at the trend-line level of 0.7018 and the horizontal level of 0.7014, followed by another layer of protection at 0.6994. Further down, the 100-period and 200-period SMAs, at 0.6975 and 0.6973 respectively, form a deeper structural floor for the bullish configuration.

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