The AUD/USD pair gathers strength to around 0.6990 during the early European trading hours on Wednesday.
The US Dollar (USD) softens against the Australian Dollar (AUD) as markets reduced their bets of a US rate hike after US inflation slowed more than expected in June
Traders await the release of the US June Producer Price Index (PPI) report for fresh impetus. US inflation, as measured by the US Consumer Price Index (CPI), eased to 3.5% in the 12 months through June, down from 4.2% in May, the US Bureau of Labor Statistics reported on Tuesday. This figure came in softer than the market expectations of 3.8%.
The core CPI, excluding food and energy, increased 2.6% YoY in June compared to a rise of 2.9% in May, below the market consensus of 2.8%. Traders have priced in nearly a 16.6% probability of a quarter-percentage-point rate increase at the Fed’s July 28-29 meeting, versus 35% before the inflation report, according to the CME FedWatch tool. They give a hike at the Fed’s September 15-16 meeting about a 60% odds, down from more than 90% before the release of the CPI data.