The AUDUSD currency pair was trading down over 57 pips after the release of downbeat Australian inflation data, where the latest monthly CPI data came in at 0.8%, missing analysts' expectations of 1%. However, the annualised CPI print met expectations set at 5.4%.
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The weak inflation data triggered a selloff in the Australian dollar. Investors believed the lower inflation figures would make the Reserve Bank of Australia (RBA) less hawkish since inflation continues to fall in the country. On the other hand, the US Federal Reserve is expected to hike rates by 25 bps later today.Â
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The trimmed mean Australian quarterly CPI print preferred by the RBA also missed expectations by coming in at 1.0% versus the consensus estimate of 1.1%. Still, investors are highly focused on the upcoming FOMC monetary policy decision and the accompanying statement.
Investors will also watch Fed Chair Jerome Powell’s speech regarding the latest monetary policy decision to see the next steps. Many do not expect the Fed to keep hiking rates after today, as the Federal funds rate will be 5.50% from 5.25%.
As for Australia, the country’s fundamentals are likely to stop the RBA from hiking rates further, given that most mortgages are on variable rates. As such, further rate hikes are pricing out many people from the mortgage market.
The Aussie had made some gains earlier in the month after the Chinese government announced measures to boost its economy, which should trickle down to Australia, given that China is the country’s largest and most important trading partner.
The WTI crude oil price decline also affected the Aussie dollar since oil is the country's leading export and foreign exchange earner. The increased crude oil stockpiles measured by the American Petroleum Institute (API) suggested that demand for the crucial energy source could have declined.
The Fed is expected to raise interest rates by 0.25% later today. Still, the wording of its accompanying statement and the Fed chair’s speech could significantly impact the US dollar, affecting the AUDUSD currency pair’s performance as of 18:00 GMT.
*This is not investment advice.
The AUDUSD price chart.
The AUDUSD currency pair was trading down 57.5 pips (0.85%) at writing as the US dollar rallied against its Australian peer.
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