Aussie dollar pulls back from 10-month high as markets eye US CPI release
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Daily Currency Update
The AUD/USD pair edged lower during the European trading session on Thursday, retreating toward the 0.6600 level after reaching a fresh 10-month high of 0.6636 in the previous session. The pullback comes amid a modest rebound in the US dollar (USD), which is gaining traction ahead of the highly anticipated US Consumer Price Index (CPI) data for August, scheduled for release at 12:30 GMT. The greenback's strength is weighing slightly on the Australian dollar (AUD), despite a stronger-than-expected domestic inflation outlook. In Australia, consumer inflation expectations for the year ahead rose to 4.7% in September, up sharply from the previous reading of 3.9%. This uptick suggests that inflationary pressures remain entrenched in the Australian economy and could pose a challenge for the Reserve Bank of Australia (RBA) as it considers the future path of monetary policy. Persistently elevated inflation expectations may limit the RBA’s ability to ease interest rates in the near term, as loosening policy in such an environment risks further de-anchoring inflation expectations. As a result, the central bank may be forced to maintain a more hawkish stance, supporting the Aussie over the medium term. In the near term, however, market participants are focused on the upcoming US inflation data, which could significantly influence Fed rate expectations and drive further movement in the AUD/USD pair.Key Movers
At the time of writing, the US Dollar Index (DXY), which measures the value of the US dollar against a basket of six major currencies, is trading near a three-day high around the 98.00 level. The recent strength in the dollar reflects cautious optimism among investors ahead of the latest Consumer Price Index (CPI) report, which could offer fresh clues about inflation trends and the broader US economic outlook. Markets are closely watching the data to assess whether President Donald Trump’s trade tariffs are contributing to sustained inflationary pressure. So far, most members of the Federal Open Market Committee (FOMC), including Chair Jerome Powell, have indicated the inflation caused by tariffs appears to be temporary and not a lasting concern. Economists expect the headline CPI to have increased by 2.9% year-over-year in August, up from 2.7% in July, suggesting inflation is picking up. Meanwhile, the core CPI, which excludes the more volatile food and energy components, is projected to have risen 3.1% annually, unchanged from the previous month. On a monthly basis, both the headline and core CPI figures are expected to show a moderate gain of 0.3%. These numbers will be critical in shaping expectations for future Federal Reserve policy moves. A stronger-than-expected inflation print could reinforce the case for keeping interest rates higher for longer, potentially boosting the US dollar further. Conversely, a weaker reading may revive bets on earlier rate cuts.Expected Ranges
- AUD/USD: 0.6550 - 0.6750 ▲
- AUD/EUR: 0.5550 - 0.5750 ▲
- GBP/AUD: 2.0300 - 2.0500 ▼
- AUD/NZD: 1.1000 - 1.1200 ▲
- AUD/CAD: 0.9100 - 0.9300 ▲