AUD Tumbles as US Inflation Data Dampens Rate Hike Expectations

The Australian Dollar (AUD) fell by 0.41% on Wednesday after erasing its initial rebound following the release of softer-than-expected US inflation data.

According to the Personal Consumption Expenditures (PCE) Price Index, annual headline inflation remained unchanged at 3.4% in August, below the 3.7% expected by markets.

The core PCE Price Index also remained steady at 3% YoY, below the 3.3% market forecast. This led to a reduction in expectations for an October rate hike, with investors now assigning around a 35% chance to a rate increase in October, down from nearly 51% a day earlier.

Meanwhile, expectations for a later move remain firm, with the chance of a rate hike in December rising to nearly 60%, from 49.4% a day earlier.