The Aussie continues to strengthen and hold at four month highs

The Aussie has extended its recent run of strength, opening the week firmer and building on gains that saw it touch a four month high last week, nearly eclipsing levels last seen in May.Locally on the data front, the focus centred on consumer and business sentiment. WMI consumer confidence fell 5.2% in September to 84.4, as renewed RBA rate hike fears, stoked by a stronger than expected July CPI print, combined with rebounding fuel prices which continued to squeeze household budgets. The NAB survey showed similar softening,with business confidence slipping to -8 from -6 and conditions falling sharply to -1 from +4, a six year low. Inflation signals were mixed as purchase costs rose 0.1 ppt to 2.3% (quarterly), while labour costs eased to 1.9% and product prices slipped to 0.8%, pointing to growing margin pressures.Outside the data, markets focused on RBA communications for further policy insights. Speaking at a fireside chat at the AFR Property Summit,RBA Chief Economist and Assistant Governor Sarah Hunter said risks to the Bank's inflation forecast remained skewed to the upside, citing a sharp recent rise in global oil prices tied to the Middle East conflict alongside continued strength in domestic rents, dwelling construction costs, and market services. She flagged that Reserve Bank staff held real concern on inflation, noting: "if there is a sense that inflation is going to be stronger than we [RBA] think, the board may well have to raise interest rates to tackle that."Attention then turned to RBA Deputy Governor Andrew Hauser, speaking on ABC's 7.30, who flagged upside risks to inflation from the Middle East conflict, the ongoing global AI boom, and Australia's weak productivity growth. He stressed that Australia’s labour market remains solid, with the unemployment rate at historical lows and employment growth driven bythe market sector, and noted the RBA board will debate a hike this month, though the outcome is not guaranteed. Taken together, Hauser's comments and Hunter's remarks on upside inflation risks point to a clear hawkish bias at the RBA, suggesting the Bank is more than likely willingto move rates in the coming months. This is a clear risk to our current rates view. Elsewhere, the key event has been the strengthening in the Yen over the past week, which hit its strongest level in seven months, surpassing levels seen after last month's US$96.8bn intervention. Reports also pointed to stop loss buying of yen, which pushed USD/JPY below 155 for the first time since the coordinated intervention between the US and Japan five weeks ago. The move reflects growing conviction that the BoJ will hike rates at next week's meeting, combined with a market view that Japanese authorities remain ready to intervene whenever needed, a stance that's likely to keep supporting the yen in the months ahead.