Monthly Wrap: AUD – Australian dollar seesaws despite robust economic data

Key takeaways:

• Upbeat economic releases supports AUD
• Hawkish RBA speeches fail to inspire ‘Aussie’
• AUD monthly lows: £0.50, $0.63, €0.59, NZ$1.07, CA$0.86
• AUD monthly highs: £0.52, $0.65, €0.61, NZ$1.08, CA$0.88

The Australian dollar got off to a poor start in September after the Reserve Bank of Australia (RBA) opted to leave interest rates at 4.1%. Alongside the third consecutive pause, former RBA Governor Philip Lowe asserted that Australian ‘inflation has passed its peak.’

Subsequent data releases helped to revive the ‘Aussie’, however. Australia’s second quarter GDP growth beat forecasts, suggesting vitality in the economy.

A significant rise in employment in August boosted bets for further interest rate hikes from the RBA, bringing additional tailwinds. However, these bets were offset by dovish meeting minutes, which prompted speculation of another pause in October.

Towards the end of the month, the ‘Aussie’ gained ground as inflation ticked up again, leading to renewed tightening bets.

However, at the start of October, the RBA elected to keep interest rates held at 4.1% once again. While RBA Governor Michele Bullock indicated room for future hikes, the hawkish rhetoric did little for AUD rates, sending it downward.

Elsewhere, shifts in risk appetite ensured the ‘Aussie’ remained volatile in recent weeks.

Looking ahead through October, a suite of impactful data releases could drive movement in the Australian dollar.

The latest Westpac consumer confidence data is forecast to show consumer optimism weakening in October, which could weigh on the ‘Aussie’. Similarly, further pressure could be exerted if September’s business confidence index falls as expected.

The RBA are set to publish their latest meeting minutes in mid-October. Despite hawkish rhetoric from RBA policymakers, explanation of the fourth consecutive rate pause may dent AUD.

Later in the month, the third quarter inflation data is scheduled for print. Economists anticipate a significant cooldown, falling from 6% to 5.1%. If this prints in line with expectations, the ‘Aussie’ could struggle to attract support.