Australian Dollar declines to near 0.7150 as hot US inflation data boost case for Fed rate hike

The Australian Dollar (AUD) dipped to approximately 0.7160 against the US Dollar (USD) on Monday morning, as robust US inflation data fuelled speculation of a potential Federal Reserve (Fed) rate hike. The US Consumer Price Index (CPI) rose 0.4% month-over-month in August, with a 12-month increase of 3.4%, in line with forecasts.

Core CPI, excluding volatile food and energy prices, climbed 0.3% month-over-month, versus a market consensus of 0.2%, and a year-over-year rise of 2.4%, down slightly from 2.5% in July. These inflation figures bolstered arguments for a Fed interest rate increase at its upcoming meeting. Furthermore, the Producer Price Index (PPI) showed strong readings, suggesting a Fed rate hike, which has bolstered the US Dollar (USD) and aided the Australian Dollar (AUD).

The Reserve Bank of Australia (RBA) may raise rates again if inflation persists, keeping the possibility of another rate hike at its September meeting alive. Analysts at UOB Group maintain their medium-term outlook for AUD/USD, while cautioning that a rapid decline could lead to a bearish stance. AUD trading remains within a range between 0.7160 and 0.7240, with technical indicators indicating a positive bias.