AUD/USD slips from 15-week high after sticky inflation meets hawkish Warsh

Sticky inflation and hawkish Fed pressure AUD/USD

AUD/USD finished marginally lower last week at 0.7162 (-0.12%), retreating sharply from a 15-week high of 0.7207 reached on Friday morning heading into the weekend.

AUD/USD's push above 0.7200 came after the Australian Bureau of Statistics (ABS) July inflation report showed headline consumer price index (CPI) inflation printed at 3.5% year-on-year (YoY). While down from 3.8% in June, it remained comfortably above the 3.2% consensus forecast. More importantly, the Reserve Bank of Australia's (RBA) preferred measure of core inflation, the trimmed mean, remained at 3.6% for a second consecutive month, exceeding the 3.5% forecast.

The RBA has repeatedly warned that inflation remains too high and has expressed a clear willingness to hike rates again to ensure high inflation does not become embedded. Given the stickiness in last week's trimmed mean measure despite the 75 basis points (bp) of RBA rate hikes already delivered this year, the Australian rates market repriced hawkishly, with a fourth 25 bp rate hike for the year now fully priced in for November.

However, AUD/USD's stay above 0.7200 was fleeting, as Federal Reserve (Fed) Chair Kevin Warsh delivered a distinctly hawkish address at Jackson Hole on Friday evening. Warsh said the Fed's 2% inflation target remains non-negotiable and noted that while recent personal consumption expenditures (PCE) and CPI prints were encouraging, they fall short of confirming a durable trend lower in underlying inflation.

This prompted a hawkish repricing across US interest rate markets, lifting the probability of a September Fed rate hike to 60% (around 15 bp) and taking the US dollar higher with it.

AUD/USD this week will be heavily influenced by risk sentiment and inflation expectations, particularly as the latest skirmish in the Middle East weighs on US equity futures and pushes energy prices higher. Friday night's US non-farm payrolls report will also be important. However, before all that, domestic attention turns to Wednesday's Australian second quarter (Q2) gross domestic product (GDP) reading, previewed below.

Q2 GDP

Date: Wednesday, 2 September at 11.30am AEST

For the first quarter (Q1) 2026, the economy grew 0.3% quarter-on-quarter (QoQ), slowing from 0.9%, leaving annual growth unchanged at 2.5%. The modest growth reflected subdued household and government consumption and weather-hit mining production and exports. Data-centre machinery and equipment was the largest contributor, but because most of those assets were imported, net trade took a large slice back out of GDP.

For the Q2 GDP reading, the preliminary expectation is for growth of 0.3% QoQ and 1.8% YoY. A print of 0.1% QoQ or less is likely needed to prompt the RBA to think twice about hiking rates after last week's warmer-than-expected July CPI report. It would also raise the spectre of stagflation in the Australian economy.

Australia GDP annual growth rate chart

AUD/USD technical analysis

AUD/USD's decline from the early-May high of 0.7277 found support in late June at 0.6863, just ahead of the then 200-day moving average.

The rebound from that low extended last week, with AUD/USD trading above 0.7200 for the first time since late May. The sharp retreat from the 0.7207 high leaves open the possibility that the pair is carving out a weekly head and shoulders top (see the weekly chart below). That only confirms on a break of neckline support at 0.6870 - 0.6860, which would then open 0.6400 as the downside projection.

To negate that downside setup and put the May high of 0.7277 back in play, AUD/USD needs a sustained break above resistance at 0.7210 - 0.7220.

AUD/USD daily candlestick chart

• _{Source: TradingView. The figures stated are as of 31 August 2026 Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}