AUD Slips as US Dollar Gains Strength Ahead of Inflation Report

The Australian Dollar (AUD) slipped on Wednesday as the US Dollar (USD) gained strength ahead of a crucial inflation report. The AUD/USD currency pair traded around 0.7060 during Asian hours, down from modest gains in the previous day. Market expectations remain divided over the Federal Reserve's next interest rate decision following its decision to hold rates steady in July.

Rising crude oil prices have fueled arguments for a more aggressive policy stance, but odds for a 25-basis-point Fed rate hike in September have softened slightly, dropping to nearly 48% according to the CME FedWatch Tool. This indicates a cautious outlook for the Aussie and AUD/USD.

The Greenback received support from geopolitical uncertainty surrounding a potential diplomatic deal between the US and Iran. However, US President Donald Trump injected renewed caution into the markets by insisting that Tehran must pay reparations to the victims of attacks associated with the Islamic Republic.