AUD unable to capitalise on easing US inflation
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Daily Currency Update
The AUD underperformed on Wednesday, unable to take advantage of a weakening USD amid ongoing US/China tariff uncertainty. The two-day trade negotiations between the US and China concluded overnight, but offered little to alleviate ongoing trade reservations. Officials confirmed a framework had been established to implement the agreement founded in Geneva. In short, both sides agreed with what was already agreed last month. The absence of any new progress in negotiations disappointed markets and weighed on the AUD, capping gains and ensuring it continues to track within a narrow trading handle. Softer than expected US CPI data helped add a floor beneath the AUD and ensured it closed another session above US$0.65, an important milestone in consolidating an extension in recent gains. While steady against the USD, the AUD has underperformed against other key majors, falling against the euro, GBP and yen.With little of note on the domestic ticket, our attentions now turn to UK GDP and PPI reports and US jobless claims.
Key Movers
The US dollar opened lower this morning after softer CPI inflation data and a seeming lack of progress in US/China trade talks. The two-day trade negotiations in London concluded overnight with limited progress toward easing trade tensions. However, softer CPI data and reduced risk appetite suggest that the inflationary impact of Trump’s tariff agenda may be less severe than initially feared. Inflation through May was weaker than expected, climbing just 0.1% which is well short of the 0.3% jump markets had anticipated. There's growing evidence that President Trump's broader policy agenda is offsetting the inflationary pressures generated by tariffs. Uncertainty and a disdain for the current America First mantra has forced prices across key services lower, particularly tourism. US treasury yields fell in the wake of the inflation report, prompting markets to price in two full rate cuts through year-end. With the USD on the back foot the euro and GBP enjoyed strong gains, the with euro pushing above 1.15 while Sterling recaptured 1.3550 and the yen found support against the lower rates backdrop.Our attentions turn now to UK GDP and PPI data, with US jobless claims rounding out the macro agenda.
Expected Ranges
- AUD/USD: 0.6450 - 0.6550 ▲
- AUD/EUR: 0.5620 - 0.5720 ▼
- GBP/AUD: 2.0680 - 2.1000 ▲
- AUD/NZD: 1.0750 - 1.0850 ▲
- AUD/CAD: 0.8850 - 0.8950 ▼