Australian dollar fell on Friday, possibly due to risk aversion.
The Australian Dollar (AUD) fell further on Friday after hitting a six-month high of 0.6798 the day before. The Australian Dollar pair gained support as the US Dollar (USD) fell following softer-than-expected US Consumer Price Index (CPI) data in June. This has fueled speculation about a possible Federal Reserve (Fed) rate drop in September.
AUD may limit its fall due to rising anticipation that the RBA will retain a hawkish posture.
The Australian Dollar may limit its losses as speculation develops that the Reserve Bank of Australia (RBA) would delay the Global rate-cutting cycle, or possibly raising interest rates again. Australia’s persistently high inflation has prompted the RBA to adopt a hawkish posture.
The US dollar (USD) stays weak as US Treasury yields fall. Investors in the fed funds futures market have raised their wagers on a US Federal Reserve rate decrease beginning in September. According to CME Group’s FedWatch Tool, markets now expect a nearly 89% chance of a rate cut at the September Fed meeting, up from 73% on Wednesday.
Daily Market Movers: Australian Dollar Edges Lower Due to Risk Aversion.
The Australian Dollar (AUD) fell further on Friday after hitting a six-month high of 0.6798 the day before. The US Consumer Price Index (CPI) fell by 0.1% month on month in June, reaching its lowest level in more than three years. On an annual basis, the headline CPI climbed by 3.0% in June, down from 3.3% in May and below market expectations of 3.1%.
The core CPI, which excludes volatile food and energy costs, increased by 3.3% year on year in June, compared to 3.4% in May and matching expectations. Meanwhile, the core CPI rose by 0.1% month on month, compared to the predicted and prior figure of 0.2%.
Australian Consumer Inflation Expectations The July figure was 4.3%, slightly lower than the prior report of 4.4%.
The Fed’s Goolsbee noted that the US economy appeared to be on track to attain 2% inflation.
Austan Goolsbee, President of the Federal Reserve Bank of Chicago, stated Thursday that the US economy appeared to be on track to attain 2% inflation. This indicates Goolsbee is gaining. Confidence that the time to decrease interest rates is approaching. Goolsbee also added, “My view is, this is what the path to 2% looks like,” according to Reuters.
According to Reuters, Federal Reserve Board Governor Lisa Cook said on Wednesday that “my baseline forecast…is that inflation will continue to move toward target over time, without much further rise in unemployment.”
On Wednesday, Fed Chair Jerome Powell stressed the importance of constantly monitoring the job market, saying that it has deteriorated dramatically. Powell also voiced confidence in the decreasing trajectory of inflation.
On the first day of his Congressional hearing, Fed Chair Jerome Powell took questions from the Senate Banking Committee. Powell said: “More good data would strengthen our confidence in inflation.” He stated that a “policy rate drop is unwarranted until the Fed obtains greater confidence that inflation is heading steadily toward 2%.” He also stated that “first-quarter data did not support the greater confidence in the inflation path that the Fed requires to cut rates.”
