Australian Dollar declines following TD-MI Inflation Gauge data
AUD/USD declines after two days of gains, trading around 0.6930 during the Asian hours on Monday. The currency pair loses ground following the release of TD-MI Inflation Gauge data, which came in at -0.4% month-over-month, against the -0.3% prior.
Traders are weighing hawkish interpretations of the Reserve Bank of Australia’s (RBA) June Meeting Minutes released last week. Major Australian banks noted that the RBA remains highly concerned about sticky inflation. The Commonwealth Bank of Australia pointed out that the minutes highlighted persistent excess demand and capacity constraints, while ANZ echoed this view, warning that the minutes reinforce the distinct risk of another RBA rate hike ahead.
The US Dollar (USD) holds its ground, buoyed by market expectations of multiple Federal Reserve (Fed) rate hikes later this year. This comes despite easing global inflation concerns, which have been helped by oil flows normalizing through the critical Strait of Hormuz.
The CME FedWatch tool shows financial markets are pricing in a 77.3% chance of interest rate hikes by year-end. Investors are now looking ahead to Wednesday's release of the Fed’s June policy Meeting Minutes to gain clearer insights into the future path of interest rates.
However, recent US labor data have forced Wall Street to aggressively rethink this hawkish outlook. The latest Nonfarm Payrolls (NFP) report revealed the US economy added a mere 57,000 jobs last month, severely missing the market's forecast of 110,000. While the headline unemployment rate did manage an unexpected drop to 4.2% from May's 4.3%, the dramatic hiring slowdown strongly signals that the broader economy is cooling down.
Amid this shifting backdrop, Fed Chair Kevin Warsh firmly reaffirmed the central bank’s independent commitment to its 2% price stability target. Notably, he also acknowledged that inflation risks and expectations have finally begun to moderate over the past month.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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