AUD/USD extends decline amid stronger US CPI data, Trump renews rate cut call

• The Australian Dollar extends its decline for the third consecutive day against the US Dollar.
• Sticky inflation pressures prompted markets to scale back Fed interest rate cut expectations in September.
• The US Dollar Index climbs to 98.70, reaching a three-week high on firm inflation and hawkish rate repricing.

The Australian Dollar (AUD) weakened further against the US Dollar (USD) on Tuesday, following stronger-than-expected US inflation data that dampened hopes for a near-term interest rate cut. The Greenback surged across the board, pushing AUD/USD to 0.6510 during the American trading session.

US Consumer Price Index (CPI) rose 0.3% in June from the previous month, slightly above the 0.2% consensusand 2.7% YoY, surpassing May's 2.4% print. It marked the fastest pace since January and signaled that underlying price pressures remain sticky despite the Fed's tightening efforts. The data prompted a sharp repricing in Fed funds futures, with the odds of a September rate cut falling below 55%, down from nearly 65% earlier in the week.

The strong CPI reading reignited demand for the US Dollar, with the US Dollar Index (DXY) spiking to 98.70 its highest level in three weeks. The Greenback's rise weighed on risk-sensitive currencies, such as the Aussie, especially amid a cautious global risk environment dominated by trade tensions.

Following the June CPI report, former President Donald Trump took to Truth Social to renew his call for immediate interest rate cuts, declaring: "Consumer Prices LOW. Bring down the Fed Rate, NOW!!!" He claimed that a substantial reduction in interest rates could save the U.S. government over a trillion dollars annually in debt servicing costs. The post adds another layer of political pressure on the Federal Reserve, even as inflation remains above the 2% target and markets continue to price in only gradual policy easing in the coming months.