The Australian Dollar (AUD) remains stable against the US Dollar (USD), trading around 0.6650 during Asian hours on Thursday. This stability follows gains in the previous session, driven by heightened inflation concerns, which have fueled speculation about a potential interest rate hike by the Reserve Bank of Australia (RBA) in August.
Australia’s Consumer Inflation Expectations rose to 4.4% in June, up from 4.1% in May, indicating persistent cost pressures. The inflation rate continues to exceed the RBA’s target range of 2%-3%, primarily due to high service costs.
According to data from the Australian Bureau of Statistics (ABS) published on Wednesday, Australia’s monthly Consumer Price Index (CPI) increased by 4.0% in the year to May, up from 3.6% in April. This rise surpassed market expectations, which had forecast a 3.8% increase.
RBA Assistant Governor Christopher Kent emphasized on Wednesday the importance of remaining vigilant regarding potential inflation increases. He noted that current policies are effectively slowing demand growth and lowering inflation. Kent also stated that all options regarding future interest rate adjustments remain on the table.
On the USD side, traders are anticipating the release of the US Gross Domestic Product (GDP) Annualized data for Q1 on Thursday, which is expected to show a slight increase of 1.4%, up from the previous growth of 1.3%. Additionally, the Core PCE Price Index inflation, due on Friday, is projected to decrease year-over-year to 2.6% from 2.8%. Market participants are hopeful that signs of easing inflation will prompt the Federal Reserve (Fed) to consider rate cuts sooner rather than later.
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