The recent US Consumer Price Index (CPI) report revealed that core inflation remained steady at 3.2% year-over-year, leading to a pullback in the AUD/USD pair. Market sentiment shifted as expectations for a 50-basis point rate cut by the Federal Reserve waned, with money market futures now predicting an 85% likelihood of a 25-bps rate cut at the next Fed meeting.
RBA Assistant Governor’s comments on the Australian labor market being tight yet balanced added to the market dynamics, with the AUD awaiting further US data releases this week.
Key Highlights:
- The AUD/USD trades at 0.6627 after the US CPI report
- Core inflation in the US remains at 3.2% YoY
- Market bets on Fed rate cut shift to 25-bps
- RBA’s Assistant Governor comments on Australian labor market
Analysis and Outlook:
The impact of US core inflation holding steady at 3.2% YoY has led to a decline in the AUD/USD pair, with market participants adjusting their expectations for a Federal Reserve rate cut. The shift in sentiment towards a 25-bps rate cut has supported the US Dollar, resulting in the AUD dropping to 0.6627. Moving forward, the AUD’s performance will be influenced by further US data releases and developments in the labor market. Traders should keep an eye on key economic indicators to gauge the future direction of the AUD/USD pair.