Australian Dollar Surges to Three-Month High as Hot CPI Dims RBA Rate-Cut Bets, Dollar Holds Pattern Ahead of PCE

Currency markets traded cautiously on August 26 as investors positioned ahead of two major events: the July U.S. personal consumption expenditures report due later in the day and Federal Reserve Chair Kevin Warsh's keynote address at the Jackson Hole symposium on Friday. The dollar edged modestly higher but remained range-bound against most major peers in that wait-and-see environment. The standout mover was the Australian dollar, which climbed to $0.71865, its highest level in three months, after Australian trimmed mean CPI, the Reserve Bank of Australia's preferred inflation gauge, rose 3.6% annually, faster than expected.

Capital Economics analysts flagged that the persistent underlying inflation keeps open the possibility of another RBA rate hike in the months ahead, pushing traders to pare back rate-cut wagers and bid up the currency. Sterling dipped intraweek, failing to break above the 1.3660 resistance level against the dollar and hitting fresh intra-week lows. The Canadian dollar faced pressure as USD/CAD approached its 20-day exponential moving average, with a rekindled U.S.-Canada trade dispute adding to the loonie's headwinds.

The broader FX market remained in a consolidative posture, with the PCE print and Jackson Hole speeches seen as the catalysts most likely to break the prevailing ranges.