The Australian dollar has been performing well this week, with four consecutive winning sessions and trading at 0.6534, up 0.24% in the European session on Friday. The Aussie has seen a significant climb of 1.82% this week, driven by Australia’s Producer Prices index surpassing expectations.
The PPI in Australia soared 4.3% year-on-year in the first quarter, higher than the 4.1% recorded in Q4 2023 and exceeding the market estimate of 2.6%. Quarterly, the PPI remained steady at 0.6%, also surpassing the market estimate of 0.6%. This strong PPI release follows the first-quarter CPI report, where annual CPI dropped to 3.6% in April from 4.1% but still exceeded the market estimate of 3.4%.
The Australian dollar’s recent gains can be attributed to the better-than-expected CPI and PPI releases. The Reserve Bank of Australia may respond by maintaining its “higher for longer” stance, potentially impacting consumer spending. There is even speculation of an RBA rate hike as policymakers monitor the inflation rebound. Achieving the 2% inflation target remains challenging, as seen with the Federal Reserve’s experience.
Looking ahead, the US Core PCE Price Index is expected to ease to 2.6% year-on-year in April from 2.8% in May. On a monthly basis, the index is anticipated to remain unchanged at 0.3%. Rising consumer inflation in the US has led the Fed to delay rate cuts.
In terms of technical analysis, AUD/USD is testing resistance at 0.6555, with further pressure at 0.6618. Support levels are at 0.6487 and 0.6424.
Overall, the Australian dollar’s positive performance this week is supported by strong economic data, signaling potential implications for monetary policy decisions.