Australian Dollar Falls After Inflation Data

The Australian dollar weakened against other major currencies in the Asian session on Wednesday, as the nation's inflation report spurred expectations among the traders that the Reserve Bank of Australia is likely to maintain its interest rates steady at its monetary policy meeting due next week.

Data from the Australian Bureau of Statistics showed that the monthly CPI rose by 3.8 percent in the year to June, easing from the 4 percent in May.

The consumer prices in Australia were up 1.0 percent on quarter in the second quarter of 2024, unchanged and in line with expectations.

On a yearly basis, inflation rose 3.8 percent, again matching forecasts and up from 3.6 percent in the three months prior.

Traders remain optimistic about the outlook for interest rates as they cautiously await the U.S. Fed's monetary policy announcement later in the day.

Though the Fed is widely expected to leave interest rates unchanged, traders will be looking to the accompanying statement for additional clues about a possible rate cut in September.

Crude oil prices fell amid continued concerns about the outlook for demand, and ahead of the Federal Reserve's monetary policy announcement and weekly inventory data later today. West Texas Intermediate crude oil futures for September ended down $1.08 or 1.42 percent at $74.73 a barrel.

In other economic news, data from the Reserve Bank of Australia showed that the private sector credit in Australia was up 0.6 percent on month in June, beating forecasts for 0.4 percent, which would have been unchanged.

On a yearly basis, private sector credit climbed 5.6 percent.

The ABS also reported that the value of retail sales in Australia was up a seasonally adjusted 0.5 percent on month in June, coming in at A$36.204 billion. That beat forecasts for an increase of 0.2 percent following the 0.6 percent increase in May.

On a yearly basis, sales rose 2.2 percent.

Further, the latest survey from the National Bureau of Statistics showed that the manufacturing sector in China continued to contract in July, and at a slightly faster rate, with a manufacturing PMI score of 49.4. That was in line with expectations and down slightly from 49.5 in June.

The survey also showed that the non-manufacturing PMI came in at 50.2 - again matching forecasts and easing from 50.5 - but still expanding. The composite PMI was also at 50.2, down from 50.5 a month earlier.

In the Asian trading today, the Australian dollar fell to nearly a 3-1/2-month low of 98.59 against the yen and nearly a 5-month low of 1.6700 against the euro, from yesterday's closing quotes of 99.89 and 1.6539, respectively. If the aussie extends its downtrend, it is likely to find support around 97.00 against the yen and 1.68 against the euro.

Against the U.S., the New Zealand and the Canadian dollars, the aussie slid to a 3-month low of 0.6479, nearly a 4-week low of 1.0969 and nearly a 3-month low of 0.8973 from Tuesday's closing quotes of 0.6537, 1.072 and 0.9052, respectively. The aussie may test support near 0.63 against the greenback, 1.06 against the kiwi and 0.88 against the loonie.

Looking ahead, Germany's unemployment rate for July and Eurozone flash harmonized inflation data for July are slated for release in the European session.

In the New York session, U.S. MBA weekly mortgage approvals data, U.S. ADP Nonfarm employment data for July, Canada GDP data for May, U.S. pending home sales for June and U.S. EIA crude oil data are slated for release.

At 2:00 pm ET, the U.S. Federal Reserve will announce its fifth interest rate decision for 2024 later tonight after a two-day Federal Open Market Committee (FOMC) meeting today. The central bank is expected to maintain its benchmark interest rates between 5.25 per cent - 5.50 percent.

Half-an-hour later, U.S. Fed Chairman Powell will conduct a press conference about the final monetary policy announcement.