Aussie dollar continues to trade above US$0.65

Daily Currency Update

The Australian dollar is slightly higher this morning when valued against the Greenback. The Aussie traded higher on Friday against the Greenback as the pair remains capped on the upside despite hitting a new month high at 0.6595, as a key technical resistance level that acted like a magnet drove the exchange rate toward the 0.6550s area. At the time of writing, the AUD/USD trades at 0.6559, up 0.06%. Last week the Reserve Bank of Australia (RBA) ruled out another cash rate increase because it is not sufficiently confident inflation is on track to fall into its target range within the next couple of years. The RBA forecasts annual consumer price inflation, currently 4.1 per cent, will fall to 2.8 per cent in December 2025. But in the minutes of the RBA’s February 5-6 monetary policy meeting, board members noted that uncertainty about the economy was high, and the cost of not achieving low inflation within the next couple of years was very high. Markets expect the RBA’s next move will be a cut. Traders are fully priced for a 0.25 percentage point rate decrease at the RBA’s September 23-24 board meeting.
Looking ahead this week and on Wednesday Australian Bureau of Statistics will release the latest Consumer Price Index (CPI) which is expected to increase from the previous month 3.4% to 3.6%. Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. On Thursday we will see the release of the monthly Retail Sales figures which is the primary gauge of consumer spending, which accounts for the majority of overall economic activity. Finally, on Friday the RBA will release the Index of Commodity Prices which is a leading indicator of the nation's trade balance with other countries because rising commodity prices boost export income.