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Australian dollar holds near 0.7000 after softer US inflation
AUD/USD steadied around 0.7000 after US PPI showed a 0.3% June decline and investors scaled back bets on a July Fed hike.
The Australian dollar traded flat to slightly firmer against the US dollar on Thursday, with AUD/USD consolidating near 0.7000 as the US dollar weakened. FXStreet attributed the move to investors dialing back expectations for immediate Federal Reserve tightening after softer US inflation data earlier in the week.
US Producer Prices Index data released Wednesday showed factory inflation contracted 0.3% in June, reversing a 0.6% increase in May and coming in below expectations for a flat reading. The year-on-year PPI eased to 5.5% from 6.0%, under the market consensus of 6.2%.
The PPI followed another cooldown in the Consumer Price Index, which posted its largest monthly drop in nearly six years in June, and slowed year-on-year CPI to its lowest rate since March. FXStreet said these signals led investors to effectively rule out a July Fed rate hike and reduce expectations for further monetary tightening in September.
FXStreet also noted that the Aussie dollar remained resilient even as US inflation expectations weakened, with Australian consumer inflation expectations falling to 4.7% in July from 5.5% in June. That development was not enough to alter the outlook for the Reserve Bank of Australia’s policy, according to the report.