**AUD/USD Surges Toward 0.6630 Amid Persistent US Inflation Pressure**
*Original reporting by Satya Prakash on FXStreet. Additional context and analysis have been incorporated.*
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The Australian dollar made notable gains against the US dollar, pushing the AUD/USD pair closer to the 0.6630 resistance level following the release of higher-than-expected US inflation data. The move comes amid evolving expectations surrounding Federal Reserve policy, as traders adjust to persistently strong American consumer prices while also keeping an eye on Chinese economic performance and its impact on the Australian economy.
This comprehensive analysis covers recent movements in the AUD/USD pair, the underlying economic data driving those changes, and a forward-looking perspective incorporating broader global and market factors.
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## US Inflation Data: The Key Driver
On June 12, 2024, the US Bureau of Labor Statistics released its latest inflation figures, igniting volatility in the currency markets.
– **May Consumer Price Index (CPI) Data:**
– **Headline CPI (YoY):** Rose to 3.3 percent, above the Federal Reserve’s target of 2 percent.
– **Core CPI (YoY):** Remained at 3.4 percent.
– **CPI (MoM):** Registered a 0 percent change, softer than expectations, but sticky annual inflation worried Fed officials and traders alike.
Inflation has proved surprisingly persistent, reinforcing views that the Federal Reserve may delay its first interest rate cut until later in 2024. As the market digests this “sticky inflation,” traders adjust their expectations for US monetary policy, influencing global currency markets.
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## AUD/USD: Immediate Market Reaction
The AUD/USD pair responded sharply to this inflation data:
– **Initial Rally:** The pair jumped from below 0.6600 to approach the 0.6630 resistance area within hours.
– **US Dollar Weakness:** Traders interpreted softer monthly inflation as a potential limiting factor for future Fed rate hikes.
– **Aussie Strength:** The risk-sensitive Australian dollar gained as investors rotated out of the US dollar following the data release.
Market sentiment shifted abruptly as investors reconsidered the timeline for a US rate cut. Lower expectations for an imminent cut weighed on the greenback and buoyed risk assets like the AUD.
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## Federal Reserve Policy Outlook
The Federal Reserve remains the central focus for global markets in 2024. Sticky annual inflation complicates the policy path:
– **Fed’s Rate Decision:** Scheduled for later in June 2024. No immediate cut expected after the recent inflation report.
– **Market Rate Cut Projections:**
– Implied odds of a September cut have decreased.
– Futures now price in just one rate cut by the end of 2024, down from two or three earlier this year.
– **FOMC Communication:** Chair Jerome Powell and other Fed officials have signaled patience, reiterating a need for “greater confidence” before easing policy
Read more on AUD/USD trading.