Inflation Cools, Aussie Loses Boost
AUD/USD moved cautiously on Monday (July 6th), trending sideways around 0.6940. This movement occurred after Australian inflation data showed price pressures were easing, while US services sector data remained mixed, keeping the US dollar on the defensive.
From Australia, the TD-MI Inflation Gauge fell to 3.9% year-on-year in June, from 4.4% previously. This decline signals that domestic inflationary pressures are weakening. This could ease pressure on the Reserve Bank of Australia (RBA) to maintain an overly hawkish stance.
For the Australian dollar, weaker inflation data could be a negative sentiment. If inflation continues to fall, the market could begin to anticipate that the RBA will need to be less aggressive in maintaining high interest rates. This would make it difficult for the AUD to gain a strong boost.
Meanwhile, from the United States, the S&P Global Composite PMI fell to 51.9 in June from 52.2. The Services PMI also weakened to 51.2, slightly below the 51.4 forecast and lower than the previous reading of 51.3. This data indicates that US private sector activity is still growing, but momentum is starting to slow.
The US ISM Services PMI also fell to 54.0 from 54.5, in line with market expectations. However, the labor component improved quite sharply, with the Employment Index rising to 51.2 from 47.9. Meanwhile, New Orders fell to 55.1, and Prices Paid weakened to 67.7, indicating that demand and cost pressures are starting to cool.
Overall, the AUD/USD remains in a waiting phase for a clearer direction. As long as the US dollar remains supported by the services sector employment data, AUD/USD's gains could be limited. However, if subsequent US data shows deeper weakness and inflationary pressures continue to ease, the opportunity for AUD/USD to strengthen again remains open. (arl)
Source: Newsmaker.id
