Australian Dollar pulls back as inflation expectations loom
The Aussie Dollar ended Wednesday’s session with losses against the Greenback as US inflation data matched estimates, in both headline and core. Consequently, traders pushed back against rate hikes, though the AUD/USD faded the initial move and traded at 0.7061, down 0.07%.
The Australian Dollar experienced a decline against the US Dollar on Wednesday as inflation expectations rose. US inflation data matched expectations, leading traders to reduce expectations of rate hikes. Despite a slight dip in the AUD/USD pair to 0.7061 from 0.7078, the move was not sustained. The US inflation rate for July decreased from 3.5% to 3.4%, with core inflation also falling.
Market adjustments indicated a shift from a 60% rate-hike expectation to a 60% hold for the September meeting. However, Fed dovish members remain uncertain due to potential upward pressure from a prolonged US-Iran war on energy prices. In Australia, Consumer Inflation Expectations for August will be released, with a reading above 4.7% potentially prompting the RBA to increase interest rates.
The RBA's statement showed a mixed outlook, with inflation projections seen lower and a 79% chance of holding rates at 4.40% during the September 29 meeting. Technical analysis indicates a mildly bullish near-term bias for AUD/USD, with support at 0.6992 and resistance at 0.7274.
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