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AUD/USD edges lower for third straight day near 0.7060
FXStreet reports the RBA is weighing further hikes if inflation risks reappear, while a weaker US dollar is limiting AUD/USD downside after softer US inflation data.
The Australian dollar edged lower for a third straight day, with AUD/USD trading around 0.7060 in Asian hours on Friday, according to FXStreet. RBA Assistant Governor Chris Kent said recent rate hikes are producing their intended effect, but warned that additional increases remain possible if new inflationary risks emerge. Analysts at BNY Mellon said earlier hikes are feeding into the real economy through higher borrowing costs, rising mortgage payments, softer established housing conditions, and a stronger Australian dollar, which is tightening financial conditions as demand slows to help return inflation to the RBA’s target.
Despite the pressure, the pair’s downside may be limited by a weakening US dollar after the US posted softer-than-expected inflation figures. FXStreet noted that the Bureau of Labor Statistics reported US wholesale costs were flat in July, and that core Producer Price Index inflation rose 0.2% versus expectations of 0.3%.
Those cooling inflation metrics shifted rate expectations for the Federal Reserve, with the CME FedWatch Tool showing a 34.8% probability of a US rate hike at the September meeting, down from 40% right after the PPI data release. Market attention is now turning to upcoming US July retail sales data later on Friday.