AUD catapulted higher by softer US inflation

Key Movers

The US dollar fell through trade on Wednesday, pitching lower following a softer-than-anticipated US CPI report. Year on Year inflation rose at its slowest pace since March 2021, but more importantly, core inflation printed short of expectations which was a welcome sign for policymakers concerned that core price pressures were proving stubbornly sticky. The DXY index fell near 1% as the AUD, NZD, Euro, GBP and Yen all outpaced the world’s base currency. The softer USD allowed the Yen to break back below the psychological 140 mark, while the Euro surged through 1.11 and the GBP looked set to break above 1.30 and now sits at levels not seen since April 2022.  With expectations the Federal Reserve may be nearing the end of its tightening cycle elevated, our attentions turn to US Core PPI data, a key leading indicator of further easing in inflation pressures. Another soft print could elevate calls for the Fed to end tightening rates and act as a catalyst that propels the USD higher and allows the Euro and GBP to stretch their legs. With monetary policy expected to remain tighter for longer in Europe and the UK, markets may begin redistributing their focus and attention away from the USD in pursuit of higher yield returns.