AUD Declines as Inflation Data Fails to Meet Expectations Ahead of Fed Decision

The Australian Dollar (AUD) has extended its decline ahead of the Federal Reserve's monetary policy announcement on Wednesday. The AUD/USD pair fell around 0.4% and traded near 0.6945 after softer-than-expected domestic inflation data was released.

Australia's Consumer Price Index (CPI) declined 0.1% MoM in June, compared with expectations for a 0.2% increase. Annual inflation eased to 3.8% from 4.0%, below the market forecast of 4.0%. The Trimmed Mean CPI, the Reserve Bank of Australia's (RBA) preferred measure of underlying inflation, rose 0.3% MoM, below expectations and the previous reading of 0.4%. The annual underlying rate remained unchanged at 3.6%.

The decline in the AUD is also due to geopolitical developments limiting demand for risk-sensitive currencies like the Australian Dollar. Renewed US-Iran attacks in the Gulf have contributed to a sharp recovery in Crude Oil prices, supporting safe-haven demand for the US Dollar and adding uncertainty ahead of the Fed's decision.