AUD Holds Steady as US Inflation Data and Rate Expectations Weigh on Dollar

The Australian Dollar (AUD) has remained steady at around 0.7061 against the US Dollar (USD), despite softer-than-expected US inflation data and a decrease in interest rate hike expectations for the Federal Reserve's September meeting.

According to recent data, the Personal Consumption Expenditures Price Index (PCE) was below estimates, with core PCE also ticking lower. Additionally, Initial Jobless Claims rose above forecasts but remained close to the 4-week average, indicating a solid labour market.

The repricing of interest rates has led traders to expect a rate increase towards the end of 2026, while probabilities for a September hike have dipped to 30% with a 70% chance of a hold. FOMC members Austan Goolsbee and Thomas Barkin welcomed the data, but Cleveland Fed's Beth Hammack cautioned that the Fed should raise rates to restrain growth and inflation.

In Australia, Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent warned that inflation risks are to the upside and that if realized, rates would need to rise again. This week's economic docket will feature a speech from RBA Governor Michelle Bullock, while Friday's US schedule includes July Retail Sales and the University of Michigan Consumer Sentiment.