Australia's Inflation Woes and the Aussie Dollar: What’s Next?

Let's dive into some fresh-off-the-press news that's got everyone talking—Australia’s latest inflation data. Now, I'm here in Sydney, and let me tell you, all those interest rate hikes we’ve been through seem to have missed the mark because, guess what? Inflation’s gone up again. Yep, year on year, we’re seeing a rise from 3.4% to 3.5%. And that elusive 2% target? It feels more like a distant dream at this point.

So, what does this mean for us? Well, for starters, any hopes of a rate cut are likely out the window for now. Our economy is already feeling the squeeze, and with inflation still on the rise, we're not getting the relief we need from interest rate cuts. Sure, the Aussie dollar might get a little bounce from this news, it’s already showing some short-term strength, but let’s not get too carried away.

I’ve got my eye on the Aussie dollar’s weekly short range, and while the longer-term trend still points downward, we’re sitting right around the 68 level against the USD. With inflation creeping up and rate cuts nowhere in sight, the market is in a tight spot, just like many Aussie families struggling with rising interest rates and high household debt. The sad reality is that these folks need a break, but with the current situation, that relief seems a bit far off. On the flip side, construction work—expected to rise by about 0.8%—has only managed a meager 0.1%. So not only are costs rising, but the construction sector is also taking a hit. And with more people arriving, we have to ask, where are they going to live?

The current interest rate in Australia is around 4.35%, and if we look two years ahead, the market’s only pricing it at 4.25%. Not much of a drop, right? Compare that to the US, where they’re expecting rates to be about 1.5% lower in the same period. It begs the question, are we stuck with high interest rates and a dollar that’s perched up there for the long haul?

That’s all from me, folks. Let’s hope we can get inflation under control—for everyone’s sake!

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