AUDUSD eases to near 0.6400 as consumer inflation expectations escalate, US CPI eyed

• AUDUSD has slipped marginally to near 0.6400 as Australian consumer inflation expectations sky-rocketed.
• US yields are facing pressure led by falling bets for a fifth consecutive 75 bps rate by the Fed.
• RBA Bullock is of the view that the central bank has already rates aggressively.

The AUDUSD pair has sensed selling pressure at 0.6440 and has slipped to near 0.6410 in the Tokyo session. The asset has faced a minor sell-off despite a subdued performance by the US dollar index (DXY). Meanwhile, the risk-on profile has attempted a rebound as S&P500 futures have displayed signs of recovery after a bearish Wednesday.

The DXY is failing to cross the immediate hurdle of 110.40. Meanwhile, the 10-year US Treasury yields are continuously facing downside pressure and have dropped below 4.09%. Declining chances for a fifth consecutive 75 basis point (bps) rate hike, as per the CME FedWatch tool, is weighing pressure on returns generated by US government bonds.

It seems that the release of a higher-than-projected Australian Consumer Inflation Expectation has impacted Aussie bulls. The University of Melbourne released the Australian Consumer Inflation Expectations at 6.0% against the projections of 5.7% and the prior release of 5.4%. Inflationary pressures in the Australian economy are skyrocketing and the Reserve Bank of Australia (RBA) has trimmed the pace of hikes in the Official Cash Rate (OCR).

RBA Governor Philip Lowe might face problems in containing the price pressures as the current pace in rate hikes is not in the status quo with other global central banks. On the contrary, RBA Deputy Governor Michele Bullock cited that, “we have already raised rates aggressively.” However, the gate for faster rate hikes is open if inflation doesn’t come down as expected.

On Thursday, the US inflation figures will remain in the spotlight. As per the preliminary estimates, the headline US CPI will decline to 8.0% vs. the prior release of 8.2%. Also, the core CPI is seen marginally lower at 6.5%.