AUD/USD Breaks Below 0.65 As Australian Inflation Falls

The Australian dollar has been declining by nearly 3 cents over the past two weeks; however, this week, the decline paused ahead of today’s FOMC policy meeting and the release of the June Australian CPI inflation report. Earlier this month, the AUD/USD exchange rate increased by 2 cents, reaching nearly 0.68. However, sellers returned, and the Australian dollar fell, breaking below moving averages.

Both the AUD/USD  and NZD/USD pairs are maintaining their downward trajectory, with each trading at fresh cycle lows. The AUD/USD is approaching a retracement of its upward move from the low point in April. A weaker-than-expected Australian Consumer Price Index (CPI) could weigh on the exchange rate, as the report is anticipated to show slowing inflation, which traders are concerned about. Over the past few days, AUD/USD has been consolidating, holding above the monthly low of 0.6514, and pulling the Stochastic indicator into oversold territory.

AUD/USD Chart Daily – The Swan Dive Stretches Further to the Downside

Australian July CPI Inflation Report

• Q2 CPI Inflation QoQ: The quarterly inflation rate for Q2 came in at +0.8%, which is below the expected 1.0%. This indicates a slowdown in the quarter-over-quarter inflation rate compared to Q1, which was at 1.0%.
• Q2 CPI Inflation YoY: The year-over-year inflation rate for Q2 was reported at 4.1%, slightly lower than the anticipated 4.3%. This marks a decrease from the 4.4% recorded in Q1, suggesting that inflationary pressures might be easing.

The latest CPI figures show a slight cooling in inflation, both on a quarterly and annual basis, compared to market expectations and the previous quarter’s data. This could influence the Reserve Bank of Australia’s (RBA) monetary policy decisions, as lower-than-expected inflation may reduce the urgency for rate hikes.

Additionally, these figures could impact consumer and business sentiment, as they indicate a potential stabilization in price growth, which has been a concern for both policymakers and the public. This eliminates the possibility of the Reserve Bank of Australia raising interest rates at its meeting on August 5 and 6.

AUD/USD Live Chart