AUD/USD skids to near 0.7070 as Aussie Consumer Inflation Expectations slip to 5.9%

• AUD/USD has slipped to near 0.7070 amid a downward shift in Aussie inflation expectations data.
• The Aussie inflation guidance data has landed at 5.9%, lower than the prior release of 6.3%.
• A meaningful decline in US CPI may trim Fed’s hawkish guidance.

The AUD/USD pair has dropped to near 0.7070 as the University of Melbourne has released the Aussie Consumer Inflation expectations lower at 5.9%. Earlier, the long-term inflation data landed at 6.3%. A slippage in aussie Consumer Inflation Expectations, which presents the consumer expectations of future inflation during the next 12 months will force a decline in the guidance by the Reserve Bank of Australia (RBA).

Considering the plain-vanilla aussie inflation, which landed at 6.1%, recorded the highest since 1990, for the second quarter of CY2022, higher than the prior release of 5.1% indicates that the price pressures are still far from over. However, the exhaustion signal should be cherished.

To contain the inflation mess, the Reserve Bank of Australia (RBA) has already elevated its Official Cash Rate (OCR) to 1.85% after three consecutive 50 basis points (bps) interest rate hike announcements.

Meanwhile, the US dollar index (DXY) is displaying a lackluster performance in the Asian session. The DXY is sticking to its prior day’s closing price but is likely to re-visit its six-week low at 104.64 recorded on Wednesday. The downside shift in the US Consumer Price Index (CPI) forced the market participants to dump the DXY.

The plain-vanilla US inflation landed at 8.5%, lower than the expectations and the prior release of 8.7% and 9.1% on an annual basis. A decent drop in the inflation rate on an annual basis led by a serious fall in oil prices in July has displayed a meaningful exhaustion signal to the market participants. No doubt, more rate hikes will be announced by the Federal Reserve (Fed), however, the long-term hawkish guidance will witness a serious dent.