The Australian dollar (AUD) has seen a continued appreciation against the US dollar (USD) for the third consecutive session, bolstered by recent economic indicators suggesting a potential interest rate decrease by the Federal Reserve (Fed). Recent data from the US has intensified speculation that the Fed will implement a 25-basis points cut at its upcoming September meeting.
On the economic front, the US Labor Department revealed an increase in Initial Jobless Claims for the previous week, slightly exceeding prior week’s figures, while factory inflation data highlighted a rise, primarily driven by increased service costs. The Consumer Price Index (CPI) for August also indicated a decline in headline inflation to a three-year low, although core inflation figures surpassed initial expectations. This combination of factors has contributed to heightened anticipation for the Fed’s upcoming policy adjustments.
The US Producer Price Index (PPI) recorded a month-on-month increase of 0.2% in August, surpassing the forecasted 0.1% and a 0.0% reading from the previous month. Core PPI saw a notable rise of 0.3%, compared to an expected 0.2%. In line with these trends, Initial Jobless Claims for the week ending September 6 rose to 230,000 from the previously reported 228,000.
In Australia, the conversation around monetary policy remains active, particularly with concerns regarding inflation and employment. The former Governor of the Reserve Bank of Australia has expressed worries that the current board’s singular focus on inflation may carry recessionary risks detrimental to employment rates.
Consumer inflation expectations in Australia have eased slightly to 4.4% for September, down from August’s four-month peak. Meanwhile, US inflation figures showed a year-on-year CPI of 2.5% in August, dipping from 2.9%. The core CPI remained steady at 3.2% year-on-year.
The AUD/USD pair is currently trading near 0.6730, having broken above its previous descending channel, indicating a potential shift towards a bullish trend. Should the upward momentum continue, the pair could target a seven-month high of around 0.6798, while immediate support is anticipated around 0.6720.
