AUD Surges on Hot CPI Data as US Dollar Stumbles

The Australian dollar has strengthened after the release of hot inflation data from Australia. The Consumer Price Index (CPI) rose by 3.5% year-over-year in July, exceeding market expectations and leaving room for further policy tightening by the Reserve Bank of Australia.

This news has provided a modest lift to the Aussie, causing it to climb to the 0.7170 area against the US dollar. The AUD/USD pair has been attracting buyers for two consecutive days, with traders now looking towards the upcoming release of the US Personal Consumption Expenditures (PCE) Price Index for further cues.

The US dollar is struggling to attract meaningful buyers due to diminishing odds of an immediate rate hike by the Federal Reserve and declining US bond yields. The market expectations have shifted towards a policy hold at the September 15-16 meeting, following tamer July inflation data.