AUD/USD is on a continuous rally, trading in the 0.6540s following the release of US core Personal Consumption Expenditures Price (PCE) Index data for March. Despite the data showing higher than expected inflation rates, the US Dollar (USD) has shown minimal reaction across most pairs, including AUD/USD. This could be attributed to the USD already factoring in inflationary GDP data released on Thursday. The US core PCE data for March showed a 2.8% year-on-year increase, surpassing the expected 2.6%. The lack of significant movement in the USD may be due to the anticipation of this inflationary data.
On the other hand, Australian factory gate inflation data released overnight has added momentum to the AUD/USD pair. The data revealed a 4.3% year-on-year increase in Q1, up from 4.1% in the previous quarter. This positive data, along with the Producer Price Index (PPI) data showing price pressures in the Australian economy, has lifted the AUD/USD pair. Australia’s strong inflation figures have led to expectations that the Reserve Bank of Australia (RBA) may delay interest rate cuts, with some analysts pushing back predictions for a rate cut until February 2025. This expectation of slower rate cuts compared to other countries is beneficial for the Australian Dollar, as higher interest rates attract more capital inflows.