
AUD/USD, ASX 200: Household Spending Bolsters RBA Hike Bets
Australian household spending strengthened again in July, adding to inflation and construction data supporting a September RBA hike.
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Australian household spending strengthened again in July, adding another piece of evidence to the case for a September RBA hike. With inflation, construction activity and consumer spending all pointing to firmer domestic conditions, the Australian dollar has found renewed support while the ASX 200 remains under pressure.
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Strong Household Spending Adds to September RBA Hike Bets
Another day, another data set drops to bolster bets of a September RBA hike. Yesterday it was inflation and construction spending; today, household spending has continued to heat up.
Sure, households are not splurging at the 50% annualised rates seen during locked-down COVID, but the trend is pointing higher — and it is the rate of change that central banks and economists watch, rather than absolute levels. After all, the rate has to change before the level becomes a problem.
Household spending rose 1.1% in July, marking its third consecutive monthly increase of 1% or more. While spending contracted 1% in April, it rose 1.7% in March, meaning it has increased by at least 1% in four of the past five months.

Source: ABS
Household Spending Strengthens Across Major Categories
- Household spending rose 1.1% in July, or 7% y/y
- Discretionary spending increased 1% m/m and 7.8% y/y
- Non-discretionary spending rose 1.1% m/m and 5.6% y/y
- Services spending increased 1.5% m/m and 6.8% y/y

Source: ABS
Australian Dollar Finds a Bid as RBA Hike Bets Return
The Australian dollar is the strongest FX major, rising the most against the Swiss franc and Canadian dollar. The gains are hardly on fire, but they are arriving at the cycle highs of an eight-week rally. That alone should serve as some warning that upside could be limited from here. But when such strong data sets arrive to bolster once-abandoned calls for an RBA hike, a cheeky bid for the Australian dollar seems to be in order.

Source: LSEG
AUD/USD Technical Analysis: Australian Dollar vs US Dollar
The Aussie is teasing a potential break of yesterday’s post-CPI high, but with the 72c handle and May 31 high so nearby, I suspect its upside could be limited from here heading into Kevin Warsh’s Jackson Hole speech. A hawkish Warsh could stifle the rally over the near term and help AUD/USD retrace towards its 10- or 20-day EMAs.
Note that the daily RSI (14) is near overbought and we’ve not really seen a pullback. However, with futures traders still reportable net-short and potentially scrambling for cover, a move to the May high could be in order over the coming weeks.

Source: ICE, TradingView
ASX 200 Technical Analysis
At the beginning of the week I outlined by bias for a swing high to form, and it appears that was seen on Wednesday. Despite a solid start to the session and initial 0.6% rise into the day’s high. The hot inflation print saw the ASX sharply reverse and fall 1% form that high. Today’s data has seen a continuation of that move lower, with the ASX sitting at a 3-day low. A move down to 9000 could now be on the cards, with prices below the 9100 options cluster. Also note the April and June highs around 9000 for additional support, making it a likely target for bears or area for bears to reconsider their option.

Source: ICE, TradingView
-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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