Australian Dollar holds losses following Consumer Inflation Expectations

• Australian Dollar edges lower despite Consumer Inflation Expectations rising to 4.7% in September.
• The AUD finds support as swaps priced in an 86% chance that the RBA will leave policy unchanged in September.
• The US Dollar could experience weakness as softer PPI boosts Fed easing prospects for September.

The Australian Dollar (AUD) inches lower on Thursday after registering gains in the previous session. The AUD/USD pair may regain its ground as the US Dollar (USD) could face challenges as traders expect a stronger US Federal Reserve (Fed) easing in September, following softer-than-estimated US Producer Price Index (PPI) data. Traders shift their focus to the US Consumer Price Index (CPI) for August due later in the North American session.

Australia's Consumer Inflation Expectations climbed to 4.7% in September from August's five-month low of 3.9%. The increase reflected stronger domestic demand, which in turn heightened concerns over renewed inflationary pressures. RBA Governor Michele Bullock highlighted that the private sector has begun to show "a little bit more growth," which she described as positive for the economy.

The AUD received support as solid recent key economic data from Australia weakened expectations of additional Reserve Bank of Australia (RBA) rate cuts. Swaps are now assigning nearly an 86% probability that the RBA will keep policy unchanged in September.

Australian Dollar falls as US Dollar stays firm despite priced-in Fed rate cut

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is holding ground around 97.80 at the time of writing. The Greenback faces challenges as traders widely expect a rate cut in September, marking a restart to the Fed's easing cycle.
• Markets are now fully pricing in a 25 basis points (bps) rate cut at the Fed's September meeting, while the chance of a larger 50 bps reduction has also risen to nearly 12%, according to the CME FedWatch tool.
• The US Bureau of Labor Statistics (BLS) reported on Wednesday that the US PPI inflation declined to 2.6% on a yearly basis in August from 3.3% in July. This figure came in below the market consensus of 3.3%. On a monthly basis, the PPI declined by 0.1% in August, compared to the 0.7% increase (revised from 0.9%) prior.
• According to the US Bureau of Labor Statistics (BLS), the preliminary estimate of the Current Employment Statistics (CES) national benchmark revision suggests total Nonfarm employment for March 2025 will likely be revised down by 911,000, or about 76,000 fewer jobs per month, signaling a weaker labor market than previously estimated. The final benchmark revision will be issued in February 2026 with the publication of the January 2026 Employment Situation news release," the BLS noted in its press release.
• Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee said in an interview on Bloomberg TV on Friday that he is still unsure whether September is the right time for an interest rate cut, following weaker jobs data. He added that high inflation data is still cause for concern, and key Fed officials may not be fully sold on a September rate cut.
• China's Consumer Price Index (CPI) declined 0.4% year-over-year in August after arriving at 0% in July. The market consensus was for a 0.2% decline in the reported period. The monthly CPI inflation came in at 0% versus the previous 0.4% and the expected 0.1% increase. Any Chinese economic change could impact the AUD as China and Australia are close trading partners.
• Matthew Hassan, Head of Australian Macro-Forecasting, noted that consumer recovery since mid-2024 has been sluggish, following a decline in Westpac Consumer Confidence to 95.4 in September from 98.5 in August. Hassan indicated that further policy easing may be required, projecting a 25-basis-point RBA rate cut in November, followed by two additional reductions in 2026.

Australian Dollar remains above 0.6600 support after pulling back from 10-month highs

AUD/USD is trading around 0.6620 on Thursday. The technical analysis of the daily chart shows the pair remains within the ascending channel pattern, suggesting a persistent bullish bias. Additionally, the pair lies above the nine-day Exponential Moving Average (EMA), indicating short-term price momentum is stronger.

The primary resistance lies at the 10-month high of 0.6635, which was recorded on September 10, followed by the upper boundary of the ascending channel at around 0.6650. A break above this crucial resistance zone would strengthen the bullish bias and support the AUD/USD pair to a move toward the 11-month high of 0.6687, recorded in November 2024.

On the downside, the AUD/USD pair may find initial support at the nine-day EMA of 0.6572, aligned with the ascending channel's lower boundary around 0.6560. A break below the channel would weaken the bullish bias and prompt the pair to test the 50-day EMA at 0.6517. Further declines would dampen the medium-term price momentum and put downward pressure on the pair to navigate the region around the three-month low of 0.6414, recorded on August 21.

AUD/USD: Daily Chart