AUD / USD bounces above 0.7750 on renewed USD weakness

• AUD / USD gained traction early in the US session.
• The US Dollar Index is tilting lower ahead of FOMC Chairman Powell’s speech.
• The core US CPI fell to 1.4% annually in January.

After falling back to the 0.7220 zone during European trading hour, the pair AUD/USD it turned north at the start of the American session and was last seen gaining 0.15% on the day at 0.7750.

DXY down after US inflation report.

The selling pressure surrounding the USD appears to be driving the AUD / USD higher. Data released by the US Bureau of Labor Statistics revealed on Wednesday that the Basic Consumer Price Index (CPI) in January fell to 1.4% from 1.6% and fell short of the market expectation of 1.5%.

Commenting on the CPI data, “it is not a huge surprise that the recent virus-induced weakness in activity and employment appears to be weighing on inflation,” analysts at Capital Economics said. “Now that virus cases are falling drastically and states are beginning to ease restrictions on activity, that weakness is unlikely to last long.”

The initial market reaction to soft inflation data, which is likely to allow the Fed to maintain its dovish stance, triggered a selloff of the USD and the US Dollar Index is currently losing 0.15% to 90.30. Later in the session, market participants will closely follow FOMC Chairman Jerome Powell’s remarks on the economy and political outlook.

On Thursday, consumer inflation expectations and new home sales will be on Australia’s economic agenda.

Earlier in the day, the monthly report released by Westpac showed that the Consumer Confidence Index in Australia improved to + 1.9% in February from -4.5% in January.

Technical levels