July US inflation data aligns with forecasts, easing Fed rate-hike bets and supporting a steady USD near 0.7070.
The Australian Dollar pared gains against the US Dollar, with AUD/USD slipping to around 0.7070 after touching a session high near 0.7090. US Consumer Price Index (CPI) data for July showed headline inflation rising 0.1% month-over-month and 3.4% year-over-year, matching consensus estimates. Core inflation eased to 2.5% annually, slightly below the 2.6% forecast.
The report initially weakened the USD and reduced expectations for further Federal Reserve rate hikes. Markets now price a near-50% chance of a September hike, unchanged post-data. Analysts note services price normalization and controlled tariff pass-through as signs of easing core inflation pressures.
Attention shifts to Thursday’s US Producer Price Index (PPI), where core prices are expected to slow sharply, reinforcing disinflation trends. TD Securities reiterated a Fed policy hold for the remainder of the year, citing improving inflation dynamics.