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Australian dollar jumps as US dollar slides after Fed and US data
AUD/USD was around 0.7010 and gained 0.8% after Australia’s CPI cooled to 3.8% year over year in June, denting expectations of an August RBA rate hike.
The Australian dollar rose even after softer Australian inflation data, with AUD/USD trading around 0.7010 and up 0.8% on the day, as broad US dollar weakness outweighed the negative impact from weaker CPI. Australia’s CPI slowed to 3.8% year over year in June from 4.0% previously, below the 4.0% market consensus. That prompted investors to scale back expectations for an imminent Reserve Bank of Australia rate hike, with Reuters noting that pricing for an August increase fell from nearly 21% to around 3% to 4%.
The Aussie later reversed higher as the US dollar fell sharply after the Federal Reserve meeting and a run of weaker-than-expected US macroeconomic releases. US GDP grew at a 1.5% annualized rate in the second quarter, below the 2.1% expected, with the Bureau of Economic Analysis citing softer government spending, investment, and exports, partly offset by stronger consumer spending.
Inflation data also supported ongoing disinflation in the US. The PCE Price Index fell 0.1% month over month in June, with the annual rate easing to 3.7% from 4.1%, while core PCE slowed to 3.3% year over year from 3.4%, following the Fed’s decision to keep rates at 3.5% to 3.75% with a relatively hawkish tone, according to FXStreet.