AUD/USD trades 0.4% lower near the 0.6945 area on Wednesday, extending its recent decline as the Australian Dollar (AUD) weakens following softer-than-expected domestic inflation data.
Australia’s Consumer Price Index (CPI) declined 0.1% MoM in June, compared with expectations for a 0.2% increase
Annual inflation eased to 3.8% from 4.0%, also below the market forecast of 4.0%. The Trimmed Mean CPI, the Reserve Bank of Australia’s (RBA) preferred measure of underlying inflation, rose 0.3% MoM, below expectations and the previous reading of 0.4%. The annual underlying rate remained unchanged at 3.6%.
Attention now turns to the Federal Reserve’s (Fed) monetary policy announcement later on Wednesday. The Fed is generally expected to leave the fed funds rate unchanged within the 3.50%–3.75% range, although markets assign roughly a one-in-three probability to a 25-basis-point increase. Investors will closely monitor Chair Kevin Warsh’s press conference for signals about whether persistent inflation could justify tighter policy later in the year.