Aussie inflation data will put AUD/USD in the spotlight as markets assess the chances of further RBA rate cuts. Economists expect the Aussie Monthly CPI Indicator to soften to 2.3% in April, down from 2.4% in March.
A lower print, nearing the RBA’s lower band of its 2-3% target range, could fuel speculation about multiple RBA rate cuts. A more dovish RBA stance would impact Aussie dollar demand, pressuring AUD/USD. Conversely, a surprise rise in inflation could reduce the odds of multiple RBA rate cuts, sending the pair higher.
Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on last week’s RBA press conference and policy outlook, stating:
“RBA monetary policy is “somewhat less restrictive” but the cash rate is still above the avg of the RBAs estimates of neutral (~ 2.8% in this chart). With trimmed mean infl expected to be around target & policy still tight further cuts are likely. We expect the next cut in Aug.”
Aussie Dollar Daily Outlook: The Fed Effect
Later today, Fed updates will impact US-Aussie interest rate differentials and AUD/USD. Hawkish FOMC Meeting Minutes and Fed commentary may widen the US-Aussie interest rate differential in favor of the US dollar. A wider differential could drag AUD/USD toward the 200-day EMA. A drop below the 200-day EMA would expose the 50-day EMA and $0.63623 support level.
On the other hand, dovish signals could raise bets on a Q3 Fed rate cut, narrowing the rate differential and driving AUD/USD toward $0.65370
Trade developments also remain a key driver. On May 23, AUD/USD soared from $0.64069 to $0.65370 following Trump’s EU tariff threats. However, his flip-flop on EU tariffs left the pair below $0.64500 on May 28.
