The Australian dollar strengthened to around US$0.65 on Wednesday, hitting a one-week high. This strengthening occurred after higher-than-expected inflation data came out, further convincing the market that the Reserve Bank of Australia (RBA) will remain hawkish and not ready to ease interest rates anytime soon.

The first full monthly inflation data showed that price pressures remain high. Headline inflation rose to 3.8% in October, the fastest pace in seven months and above market expectations. More importantly, trimmed mean inflation—the RBA's favorite measure of underlying price pressures—also rose to 3.3%, again exceeding expectations. Previously, very strong quarterly inflation releases had already prompted the RBA to maintain a tight interest rate.

From a fundamental perspective, RBA Assistant Governor Hunter last week assessed that the labor market remains "overheated," with unemployment declining and wage growth remaining strong. This condition confirms that policy tightening is still being felt and supports the central bank's cautious stance. In the market, the chances of an interest rate cut before May of next year are currently considered very slim, and some analysts even believe the easing cycle is over. (az)

Source: Newsmaker.id