AUD Rallies Amid Hawkish Fed, Cooling Inflation

The Australian Dollar (AUD) has gained despite cooling domestic inflation and a hawkish Federal Reserve (Fed). According to Mitrade, the AUD/USD pair traded around 0.6960 during Asian hours on Thursday.

Australia's 10-year yield fell to 4.9% as June inflation slowed to a four-month low of 3.8%, underperforming both May's figures and market forecasts of 4.0%. This led markets to drastically slash expectations for another rate increase this year, dropping probabilities to around 50%, down from over 90% prior to the data release.

The Fed kept rates steady in the 3.5%-3.75% range at its July policy meeting, an outcome widely anticipated by the markets. However, three policy members dissented in favor of a rate hike: Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed chief Neel Kashkari.

Fed Chairman Kevin Warsh stated that while the central bank will not offer forward guidance on future rate paths, it remains committed to taking all necessary actions to achieve its 2% inflation target. Warsh's press conference tone was firmer than expected, with a FXS Speechtracker score at 7/10 versus a historic 6/10.