Ella 
The Australian dollar fell against the U.S. dollar (USD) after mixed consumer price index (CPI) data released on Wednesday provided a potential signal for the future direction of the Reserve Bank of Australia’s monetary policy.
The inflation report raised expectations that the Reserve Bank of Australia may choose to keep interest rates on hold at next week’s policy meeting. However, economists have warned that further interest rate increases could affect Australia’s economic recovery.
In addition, the July manufacturing purchasing managers index released by the National Bureau of Statistics was 49.4, slightly higher than the expected 49.3, but lower than the previous value of 49.5. Meanwhile, the non-manufacturing PMI came in at 50.2, in line with expectations. These PMI data are particularly important as changes in the Chinese economy will have a significant impact on the Australian market.
AUD/USD downside may be limited as the U.S. dollar (USD) faces challenges ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday. The Federal Reserve is expected to keep interest rates unchanged in July, but market expectations for a rate cut in September are growing stronger. The speculation weighed on the dollar. In addition, signs of cooling U.S. inflation and slowing labor market conditions have further fueled expectations that the Federal Reserve will cut interest rates more than once this year, and the total number of interest rate cuts may reach three.
