AUDUSD Bulls have renewed hope. The pair has been recovering from a week-long slump as the Australian dollar gains advantage strength from a weaker dollar. The pair rose from the 0.63500 key level at the start of this week.
However, the pair remains under pressure as the market awaits the release of the US inflation report. This data could have a significant impact on the future direction of the pair.
The Reserve Bank of Australia (RBA) recently raised its interest rate by 25 basis points, citing the improvement in the labor market. The RBA also signaled that it would adopt a cautious approach to further rate hikes. This depends on the incoming data and the global economic situation.
The focus now shifts to the key Australian data releases in the upcoming week. It now includes the Wage Price Index and the employment report, which could provide more clues about the RBA’s policy stance. The market also received support from the rally in the equity and commodity markets amid the easing of geopolitical tensions.
CPI Plans Dynamic Change
The US Consumer Price Index (CPI) report for October is expected to be the main market mover for the AUD/USD pair. The CPI is a measure of the changes in the prices of goods and services purchased by consumers. The market expects the CPI to rise by 0.1% month-on-month.
The CPI report could have a considerable impact on the AUDUSD pair. This is because it could influence the expectations and actions of the Federal Reserve, the central bank of the US. The Federal Reserve has a dual mandate of maintaining price stability and full employment. It uses the interest rate as its main policy tool to achieve these objectives.
A higher-than-expected inflation reading could increase the likelihood of another interest rate hike by the Federal Reserve in December. This will boost the US dollar and weigh on the AUD/USD pair. On the other hand, a lower-than-expected or as-expected inflation reading could reduce the pressure on the Federal Reserve. This will be to tighten its monetary policy, which would favor the AUD/USD pair.
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