AUD Holds Near Highs as Mixed Data Keeps RBA Tightening Bets Alive

AUD/USD held a firm range on Thursday, trading near 0.71118, remaining in the multi-week high zone following a recent climb. Although the dollar regained some support, slightly weakening the pair on the day, the broader uptrend remains intact. Market expectations of further monetary policy tightening by the Reserve Bank of Australia (RBA) are a core factor underpinning the Aussie.

**Inflation Resilience Reinforces Tightening Expectations**

Domestic inflation pressures in Australia remain a key focus. Rising fuel prices are gradually feeding through to other goods and services prices, increasing the risk of sustained high inflation. Analysts note that even with signs of easing geopolitical tensions, constrained energy supply will still limit further downside in prices, leaving the inflation outlook far from optimistic. Against this backdrop, some institutions still expect the terminal rate in the RBA's current hiking cycle could peak at 4.60%. The real risks posed by inflation keep market bets on continued policy tightening alive.

**Mixed Economic Data**

Recent Australian economic data has shown a divergent trend. On one hand, the labor market remains broadly resilient, with business investment posting strong growth, providing support for tightening. On the other hand, the unemployment rate rose more than expected in April, indicating the jobs market is not without concerns. This mixed data picture forces the RBA to weigh more factors in its policy path, but it has not significantly shaken market expectations of a continued tightening bias. The central bank has previously noted that financial conditions have tightened notably this year, with money market rates and bond yields both moving higher.

**Technical and External Factors Intertwine**

Despite fundamental expectations providing support, the AUD also faces short-term technical pullback pressure. The currency previously ended a nine-day winning streak, with a bearish reversal pattern appearing on the daily chart, and prices pulled back at one point. On the external front, a reassessment of the U.S. monetary policy outlook could also influence the AUD's trajectory. However, against the backdrop of policy divergence between Australia and other major economies, the AUD is still seen as one of the currencies with a relative advantage.