Softer US inflation data and mixed jobless claims prompt Fed rate hike repricing, while hawkish RBA signals support the Aussie.
The Australian Dollar steadies around 0.7060 USD, posting a slight 0.01% dip as traders digest US inflation data and RBA commentary. US Producer Price Index (PPI) came in below estimates, with core PPI also easing, aligning with forecasts. Initial jobless claims rose to 209K, exceeding expectations but remaining near the 4-week average, signaling labor market resilience.
Markets adjusted Fed rate hike expectations, pricing in a potential increase by late 2026. Odds for a September hike fell to 30%, with a 70% probability of a hold. Meanwhile, RBA Assistant Governor Christopher Kent warned of upside inflation risks, hinting at possible further rate hikes if needed. Focus now shifts to RBA Governor Michelle Bullock’s upcoming speech and US Retail Sales data.
The AUD/USD pair reflects cautious sentiment as traders balance softer US data against the RBA’s hawkish stance. US Retail Sales and consumer sentiment data on Friday could further influence Fed policy expectations.