The AUD/USD pair is trading with a slight positive bias near 0.6605 on Monday. Fed officials have reiterated their stance on maintaining higher interest rates for a longer period, which has supported the USD against other currencies. Australia’s government has stated that inflation is expected to moderate to the RBA’s target range by the end of 2024, which is faster than previously predicted.
Investors are keeping an eye on key US economic data this week, including the Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales, for potential market-moving catalysts. The cautious approach from the US Federal Reserve is offering some support for the US dollar.
Consumer sentiment took a hit as inflation concerns grew, with the University of Michigan Survey reporting a decline in the Consumer Sentiment Index in May. The one-year and five-year inflation outlooks also rose to their highest levels since November 2023.
On the Australian front, the Treasury has projected that inflation could return to the RBA’s target band before the end of 2024. This is a more optimistic outlook compared to the December projections, which had inflation slowing down to 3.75% by mid-2024 and 2.75% by mid-2025.