Australian dollar steadies after losses amid US data strength and global trade concerns
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Daily Currency Update
The Australian dollar (AUD) held its ground against the US dollar (USD) on Friday, pausing a two-day losing streak driven by renewed strength in the Greenback and broader market risk aversion. The AUD/USD pair had come under pressure earlier in the week as stronger-than-expected economic data out of the United States bolstered demand for the USD. Solid US macroeconomic indicators have reinforced expectations that the Federal Reserve may maintain its higher-for-longer interest rate stance, lending further support to the dollar. Adding to the downward pressure on the Aussie was a spike in risk aversion following former U.S. President Donald Trump's announcement that he would impose a 100% tariff on branded or patented pharmaceutical imports if re-elected, effective October 1. The proposal rattled markets, contributing to a more cautious tone globally and reducing demand for risk-sensitive currencies like the AUD. On the domestic front, Australia's latest Monthly Consumer Price Index (CPI) data offered a mixed picture. The CPI rose by 3.0% year-over-year in August, up from the 2.8% annual increase reported in July. While the uptick suggests lingering inflationary pressures, it was largely in line with market expectations and does not appear to shift the Reserve Bank of Australia's (RBA) policy outlook significantly in the near term. Interest rate expectations reflected this sentiment. According to the ASX 30 Day Interbank Cash Rate Futures, markets are now pricing in just a 4% probability of a rate cut at the RBA's upcoming September meeting. Meanwhile, the odds of a rate reduction in November have declined sharply—from nearly 70% prior to the inflation release to just 50%, according to Reuters. Looking ahead, traders will be closely watching upcoming economic data releases from both the U.S. and Australia, as well as developments on the global trade front, for further clues on monetary policy direction and currency movement.Key Movers
Annual inflation in the United States, as measured by the Personal Consumption Expenditures (PCE) Price Index, rose slightly to 2.7% in August from 2.6% in July, according to data released Friday by the Bureau of Economic Analysis (BEA). The reading was in line with market expectations and signals continued, albeit gradual, progress toward the Federal Reserve's 2% inflation target. The core PCE Price Index—which excludes the more volatile food and energy components—held steady at 2.9% year-over-year, matching both July’s figure and economists' forecasts. On a monthly basis, the headline PCE Index rose 0.3%, while the core measure increased by 0.2%, reinforcing the view that inflation pressures remain persistent but are not accelerating. The report also highlighted resilient consumer activity. Personal Income rose by 0.4% in August, while Personal Spending climbed by a stronger-than-expected 0.6%, indicating that American households continue to support economic growth despite higher interest rates and lingering cost-of-living concerns. The PCE Price Index is the Federal Reserve’s preferred measure of inflation, and Friday’s data will be closely watched ahead of the next policy meeting. While the figures are unlikely to shift expectations for near-term interest rate moves, they may influence the Fed's tone on inflation persistence and the timing of future policy adjustments.Expected Ranges
- AUD/USD: 0.6450 - 0.6650 ▼
- AUD/EUR: 0.5500 - 0.5700 ▼
- GBP/AUD: 2.0400 - 2.0600 ▲
- AUD/NZD: 1.1200 - 1.1400 ▲
- AUD/CAD: 0.9000 - 0.9200 ▼