**AUD/USD hovers near 0.64 ahead of key CPI data as RBA rate outlook shifts**
*Based on reporting by Rich Dvorak, originally published on Forex Factory. Additional research and context by [Your Name].*
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The Australian dollar (AUD) is bracing for heightened volatility this week as crucial domestic inflation data is set for release, with the Reserve Bank of Australia (RBA) signaling a dovish tilt in its monetary policy outlook. The AUD/USD pair remains vulnerable around the 0.64 mark as traders await the next catalyst that could determine the currency pair’s direction into the second half of 2024.
### Recent Performance and Market Environment
– **AUD/USD Holds Range:** AUD/USD has traded in a relatively narrow band between 0.6380 and 0.6450 in June, struggling to break out despite several international economic events and US dollar fluctuations.
– **US Dollar Strength:** The US dollar has maintained a firm tone due to prevailing risk aversion and continued speculation that the US Federal Reserve will keep interest rates higher for longer, especially after recent resilient US economic data.
– **Australian Economic Concerns:** Australia faces subdued consumer confidence, tepid retail sales, and a weakening labor market, making the domestic outlook more challenging for the RBA and weighing on AUD sentiment.
### The Spotlight Turns to Australia’s Q2 CPI Data
The primary domestic factor coming into focus this week is Australia’s quarterly Consumer Price Index (CPI) print, scheduled for release on Wednesday. This data is expected to be the most important pre-RBA input, as it will strongly shape investors’ expectations for any further rate changes.
#### Why the Q2 CPI Matters
– **RBA’s Data Dependency:** Since the RBA has repeatedly pledged to base its next move on incoming data, the Q2 CPI is viewed as a must-watch. It may provide evidence of whether inflation is moderating or sticking uncomfortably above target.
– **Stubborn Price Pressures:** Australia’s inflation rate has been steadily declining from its peak but has shown pockets of persistence, particularly in areas like housing, utilities, and services.
– **Core Inflation Under Scrutiny:** Both the trimmed mean and weighted median measures are expected to show core inflation still running above the RBA’s 2-3 percent target, raising questions about the timeline for potential monetary policy easing.
#### Market Forecasts for CPI
– **Headline CPI:** Anticipated to rise 0.8 percent quarter-over-quarter in Q2, a slight deceleration from previous readings according to surveyed economists.
– **Annual Rate:** Expected to come in near 3.5 percent year-over-year, down from last quarter but still above the RBA’s comfort zone.
– **Trimmed Mean CPI:** The core indicator is projected at around 0.8 percent for the quarter, with annualized core inflation close to 4 percent.
#### Possible Scenarios Post-CPI
– If inflation comes
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