Australian dollar climbs for third day on capex rebound and surprise inflation jump
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Daily Currency Update
The Australian dollar (AUD) extended its upward momentum for a third consecutive session on Thursday, buoyed by stronger domestic economic data and continued pressure on the US dollar (USD). The latest figures from the Australian Bureau of Statistics showed that private capital expenditure rose by 0.2% in the second quarter, marking a modest rebound from the 0.1% decline recorded in the previous quarter. However, the result fell short of market expectations for a 0.7% increase, tempering the upside surprise. Despite the miss, the data was sufficient to reinforce confidence in Australia's investment climate and supported the local currency.The AUD/USD pair held its ground, underpinned by growing concerns surrounding the independence of the US Federal Reserve, which weighed on the greenback. Political uncertainty in the US—particularly attempts to interfere with the Fed’s leadership—has raised fears of policy instability, prompting investors to reassess the outlook for US interest rates.
Adding to the AUD’s strength was a hotter-than-expected inflation report, which dampened expectations of an imminent rate cut by the Reserve Bank of Australia (RBA). Australia’s Monthly Consumer Price Index (CPI) rose 2.8% year-over-year in July, a sharp acceleration from the previous month’s 1.9% increase and well above the market forecast of 2.3%. The stronger inflation print suggests persistent price pressures in the Australian economy and increases the likelihood that the RBA will maintain a more hawkish stance in the near term.
Together, these developments provided a tailwind for the Australian dollar, which continues to find support from a mix of resilient domestic data and a weakening US dollar narrative.
Key Movers
The US dollar (USD) has relinquished most of the gains it made yesterday and remains confined within a tight trading range for the month. Market attention today is firmly focused on the latest weekly jobless claims data, a key indicator of the health of the US labor market. Initial jobless claims are forecasted to decline slightly to 230,000, following a rise to 235,000 in the week ending August 16—the highest level seen since June. Should new filings continue to increase, it could heighten concerns about a weakening labor market and strengthen market expectations for the Federal Reserve to ease monetary policy further.Currently, Fed funds futures reflect nearly a 90% probability of a 25-basis point rate cut at the September 17 Federal Open Market Committee (FOMC) meeting, with markets pricing in a total of 50 basis points of easing by the end of the year. These expectations are driven by signs of slowing economic momentum and rising uncertainties around inflation and employment.
Adding to today’s market-moving events is a speech by Fed Governor Christopher Waller, who is widely regarded as a leading contender to succeed Jerome Powell when his Fed chair term expires in May 2026. Waller has consistently shown a dovish tilt, having voted for a 25 basis point rate cut at the last FOMC meeting on July 29-30. In his recent statements, he argued that tariffs contribute to inflation only temporarily, that monetary policy is currently too tight, and that downside risks to the labor market have increased remarks that underscore the growing consensus within the Fed for potential easing in the months ahead.
Together, these factors suggest that investors will be closely watching today’s jobless claims data and Waller’s remarks for clues on the Fed’s next moves and the broader trajectory of the US dollar.
Expected Ranges
- AUD/USD: 0.6400 - 0.6600 ▲
- AUD/EUR: 0.5500 - 0.5700 ▲
- GBP/AUD: 2.0600 - 2.0800 ▼
- AUD/NZD: 1.1000 - 1.1200 ▲
- AUD/CAD: 0.8900 - 0.9100 ▼