AUD Struggles to Break 0.7000 Barrier Amid Sticky Inflation Concerns

The Australian Dollar (AUD) continues to face challenges as it struggles to surpass the 0.7000 threshold against the US Dollar (USD). Despite its constructive outlook above the critical 200-day SMA around 0.6900, the AUD/USD pair remains stuck in a correction, reaching two-week lows in the low-0.6900s.

According to analysts, the RBA's cautious stance and still sticky domestic inflation are expected to underpin the Aussie in case of occasional bouts of weakness. The Australian economy itself appears healthy and stable, with solid domestic demand and decent economic growth figures. However, the specter of sticky inflation justifies the Reserve Bank of Australia's (RBA) data-dependent stance.

The latest trade balance figures showed a A$3.018 billion deficit in May, reversing April's A$1.383 billion surplus. Additionally, Gross Domestic Product (GDP) data disappointed expectations after the economy expanded by 0.3% QoQ in Q1 2026 and 2.5% YoY, with both prints coming in short of expectations.

Regarding inflation, June data came in short of what many were expecting, triggering speculation that the RBA might keep its hand steady for now. The pace of disinflation remains weak, although the direction is still broadly correct. Melbourne Institute's Consumer Inflation Expectations eased to 4.7% in July from 5.5%, reinforcing this view.