- AUD/USD trimmed a significant portion of its intraday gains in reaction to the higher US CPI figure.
- The US CPI report reaffirmed the Fed’s aggressive rate hike bets and boosted USD demand.
- A change in risk sentiment also benefited the safe-haven dollar and put pressure on it.
The pair AUSD/USD fell more than 60 pips in reaction to higher-than-expected US consumer inflation figures and was last seen trading with modest intraday gains just below the mid-0.6900 mark.
The Bureau of Labor Statistics reported on Wednesday that the US headline CPI rose 0.3% mom in April versus consensus estimates that point to a 0.2% reading. The annual rate also exceeded market expectations and rose 8.3% during the reported month. Core inflation, which excludes food and energy prices, came in at 0.6% MoM and 6.2% YoY vs. 0.4% and 6% forecast, respectively.
The data suggested that inflationary pressures in the world’s largest economy are peaking, though they were strong enough to reaffirm market bets on more aggressive policy tightening by the Fed. Markets are still pricing in a further 200 bps hike in rates through the rest of 2022 amid concerns that China’s zero-Covid policy and the war in Ukraine could continue to push up consumer prices.
Aside from this, a shift in global risk sentiment, as shown by a sharp intraday drop in equity markets, boosted safe-haven US dollar demand and put downward pressure on the AUD/USD pair. The appearance of fresh selling at higher levels suggests that the recent downward trend seen over the past month may be far from over and favors bearish traders.
Technical levels
Source: Fx Street
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