The Australian dollar drifts in Thursday trading. In the European session, AUD / USD is trading at 0.7740, up 0.12% on the day.
Inflation expectations are rising
On the day that markets await US inflation data, Australian data showed a rise in inflation expectations. MI inflation expectations for May rose to 4.4% from 3.5% and beat the 3.6% consensus. This was the highest figure in 14 months and is sure to grab the attention of RBA politicians. Of course, this does not indicate a definite jump in inflation, but inflation expectations can be converted into actual inflation figures.
Will we see an abbreviation for the RBA?
Australia’s recovery was impressive, so much so that economic conditions improved more favorably than the RBA expected in its economic forecasts. In an interview with Bloomberg, John Edwards, a former member of the RBA’s board of directors, said he expects the central bank to cut its quantitative easing program at its July policy meeting.
The current AU $ 100 billion bond purchase round expires in September. The July meeting will be closely monitored as politicians decide whether to renew purchases for a third time. If there is a reduction in QE, the Australian dollar could respond with strong gains.
US inflation will be next
In the US, the May CPI will be released later today (12:30 GMT). In April, the 0.8% MoM gain caught the markets by surprise and the US dollar reacted with a strong, albeit short-lived gain. However, this shows that concerns about inflation are very worrying for the markets. The consensus is 0.4% growth, so 0.50% or less should allow the markets to return to normal. Stronger gains, however, could spark speculation about tightening policies and lift the US dollar, as we saw after the April CPI release.
AUD / USD Technical
- AUD / USD meets resistance at 0.7797. Higher resistance 0.7849.
- On the other hand, there are support levels at 0.7669 and 0.7593.
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