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Australian dollar slips as US inflation data cools rate-hike bets
AUD/USD traded at 0.7061, down 0.07%, after US annual inflation fell to 3.4% and the core rate eased to 2.5%.
The Australian dollar weakened against the US dollar after US inflation data came in line with expectations on both headline and core measures, cooling market expectations for further rate hikes, according to FXStreet.
US annual inflation for July eased from 3.5% to 3.4%, while the core print fell to 2.5%, a tenth below June, signaling continued progress in disinflation. After the release, money markets shifted toward more dovish outcomes for the Fed, with expectations moving from a 60% rate-hike probability to a 60% hold for the September meeting, according to Prime Terminal.
Despite the shift, FXStreet noted that dovish bets could face risk if geopolitical developments reignite inflation, pointing to the possibility that a prolonged US-Iran war could lift energy prices and put upward pressure on inflation.
In Australia, traders are looking ahead to the August Consumer Inflation Expectations release, with the prior reading at 4.7%. For the RBA, rates were held at 4.40% on August 11, and FXStreet said Prime Terminal expects the RBA to keep rates unchanged on September 29, with 79% odds, versus a 21% chance of a 25-basis-point hike.