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The Australian dollar appreciated as rising consumer price index (CPI) reduced the chances of a rate cut by the Reserve Bank of Australia.
Australia’s CPI rose 4.0% year-on-year in May, compared with expectations of 3.8%.
The US dollar remained calm as investors turned cautious ahead of key US data released this week.
The Australian dollar regained lost ground after Australia’s consumer price index in May was stronger than expected. The continued high level of inflation is a stumbling block for the Reserve Bank of Australia (RBA) to cut interest rates, which is likely to support the Australian dollar and boost AUD/USD.
Christopher Kent, assistant governor of the Reserve Bank of Australia (RBA), said on Wednesday that recent data highlighted the need to remain vigilant about potential inflation increases. Kent pointed out that current policies are leading to slower demand growth and lower inflation. Kent also mentioned that future interest rate adjustments are not ruled out, according to Bloomberg.
The US dollar remained calm after rising on Tuesday. Investors turned cautious ahead of key US economic data released later this week. Revised U.S. first quarter (Q1) gross domestic product (GDP) figures are due on Thursday, followed by the U.S. PCE price index on Friday.
