The Australian dollar (AUD) remained subdued against the U.S. dollar (USD) on Wednesday. The AUD/USD pair is facing challenges amid broad strength in the US dollar (USD). Traders are now focused on the release of key U.S. consumer price index (CPI) data for November, which is expected later in the North American trading session.
U.S. CPI inflation is expected to rise to 2.7% in November from 2.6% in October. Meanwhile, core CPI, which excludes food and energy, is expected to maintain a year-over-year gain of 3.3%. Any signs of stalling could significantly reduce the likelihood of a rate cut by the Federal Reserve, potentially boosting the dollar. Traders now price in a near 85.8% chance of a 25 basis point rate cut by the Fed on Dec. 18, according to CME’s FedWatch tool.
The Australian dollar has come under downward pressure following the Reserve Bank of Australia’s (RBA) decision to keep the official cash rate (OCR) unchanged at 4.35% at its last policy meeting in December. Reserve Bank of Australia Governor Michele Bullock stressed that while upside inflation risks have eased, they remain and require continued vigilance. The Reserve Bank of Australia will closely monitor all economic data, including employment data, to guide future policy decisions.
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