Australian dollar extends rally as markets raise rate-hike odds
TLT•The Australian dollar rose 0.1% to $0.7011 as markets put the chance of a November rate hike at 44%, up from 30% at the start of the week. Markets priced a 64% chance of a December move.
1. Australian rate outlook
The Australian dollar was on track for a fourth straight session of gains as US yields declined and markets raised the odds of another Reserve Bank of Australia rate hike. Deputy Governor Andrew Hauser said monetary policy was working but the inflation outlook looked “materially worse,” partly because of high oil prices. The RBA will discuss rates at its November 3 meeting.
2. Inflation data ahead
Australian third-quarter consumer price data are due next week. Analysts suspect core inflation could rise 0.9% to 1.0%, keeping the annual pace at 3.5%, above the RBA’s 2% to 3% target band. In New Zealand, markets imply almost a 90% chance of a quarter-point rate increase to 3.0% next week; median forecasts put third-quarter inflation at 0.8%.
