AUD Pulls Back Amid Softer US CPI, RBA Inflation Expectations Loom
The Australian Dollar (AUD) pulled back against the US Dollar (USD) on Wednesday as inflation expectations loomed, despite softer US Consumer Price Index (CPI) data. The AUD/USD slipped to 0.7061, down 0.07%, after the US annual inflation rate eased from 3.5% to 3.4%. The core print came at 2.5%, a tenth below June's number.
The US Federal Reserve (Fed) hold bets rose, but energy risks threatened disinflation. A prolonged US-Iran war could reignite a rally in energy prices, exerting upward pressure on inflation.
In Australia, the Consumer Inflation Expectations for August will be released, with the previous print being 4.7%. A reading above this could put pressure on the Reserve Bank of Australia (RBA) to increase rates, which held rates unchanged at 4.40% at the August 11 meeting.
The RBA struck markets with a mixed tone in its statement, with inflation projections seen lower, near the RBA's goal, while recognizing that 'inflation remains elevated and risks are skewed to the upside.'