AUD/USD extends its rise to 0.6620 after US PPI, focus is on US inflation.

• The AUD/USD pair advances to 0.6620 amid a cheerful mood in the markets and a decline in the US Dollar.
• The US PPI data fails to boost the attractiveness of the US Dollar.
• Economists estimate Australia's wage price index grew steadily in the first quarter of this year.

The AUD/USD pair continues to rise to 0.6620 in the American session on Tuesday. AUD/USD strengthens while the US dollar comes under pressure even though the US Producer Price Index (PPI) for April has turned out to be slightly bullish. The US Dollar Index (DXY), which tracks the dollar against six major currencies, falls near the crucial support of 105.00.

Annual headline and core PPI data, which strip out food and energy price volatility, grew in line with estimates of 2.2% and 2.4%. The headline and core monthly PPI rose sharply by 0.5%, beating consensus and previous readings. The rise in corporate prices is mainly due to rising input prices or strong household spending, or a combination of both.

A big spike in producer inflation shows signs of persistent price pressures, which could negatively influence speculation about rate cuts by the Federal Reserve (Fed), for which financial markets expect the meeting September is the earliest point.

Meanwhile, market sentiment is positive, as investors have distanced themselves from uncertainty ahead of the US Consumer Price Index (CPI) data for April, which is released on Wednesday. The S&P 500 opens on a slightly bullish note. Inflation data in the US has remained above forecasts in the first quarter of this year. Similar figures would undermine the Fed's rate cut prospects for the full year.

As for the Australian dollar, investors await first quarter wage price index data, due to be released on Wednesday. Quarterly and annual wage inflation data are expected to have grown steadily by 0.9% and 4.2%, respectively. The persistence of wage growth data would trigger upside risks to inflation, forcing the Reserve Bank of Australia (RBA) to maintain a restrictive interest rate framework for longer.