News Maker 23

The AUD/USD traded slightly lower on Thursday (September 10th), trading around 0.7215 at the start of the Asian session. The correction occurred after the Australian dollar had previously strengthened to around 0.7238, its highest level since mid-May, as expectations for a Reserve Bank of Australia (RBA) interest rate hike grew.

Pressure on the Aussie primarily stemmed from investors' more cautious stance ahead of the release of US inflation data. The market awaited the US Producer Price Index (PPI) on Thursday, before the CPI data was released Friday, for fresh clues regarding the Federal Reserve's policy direction.

Global risk-off sentiment also limited the AUD's gains. Brent oil prices remained above US$100 per barrel due to the escalating US-Iran conflict, fueling concerns about global inflation and pressuring Asian stock markets. These conditions tend to be a drag on the Australian dollar, which is sensitive to changes in investor risk appetite.

However, the decline in the AUD/USD remained relatively limited as the market increasingly expects the RBA to tighten monetary policy further. RBA official Sarah Hunter said additional tightening may be necessary if inflationary pressures remain strong. These expectations help maintain the attractiveness of the Australian dollar.

Official RBA data also showed AUD/USD at 0.7232 on September 9, up from 0.7209 earlier in the week. Australian inflation remains above target, with trimmed mean inflation recorded at 3.6% annually in the June quarter, so the market continues to consider the possibility of Australian interest rates remaining high or being raised again.

For the upcoming trading session, the direction of AUD/USD will be heavily influenced by US inflation data. A hotter PPI could strengthen expectations of a Fed rate hike and push AUD/USD back towards the 0.7200 area. Conversely, a lower-than-expected PPI could potentially weaken the US dollar and open the door for the Aussie to retest the 0.7235–0.7240 area. (CP)