- The Dollar fell after the publication of inflation data in the United States.
- US inflation slowed to 3.2% in October, and underlying indicators also fell.
- The AUD/USD pair rose strongly, gaining more than 70 points in just a few minutes.
The AUD/USD pair rose from 0.6370 to 0.6450 in a few minutes after the publication of the US Consumer Price Index (CPI) figures for October, below expectations. The Dollar Index retreated sharply and fell below 104.80, reaching its lowest level since September 20.
US inflation cools, so Fed rate hike expected
The US CPI was unchanged in October, defying expectations of a 0.1% increase, following a 0.4% rise in September. The annual inflation rate fell slightly from 3.7% in September to 3.2% in October, placing it below the market consensus, which placed it at 3.3%. Core CPI, which excludes food and energy price volatility, rose 0.2% monthly, below market expectations of 0.3%. The annual core inflation rate stood at 4.1%, slightly below the 4.2% recorded the previous month.
Following the release of the data, the probability of a December rate hike fell to virtually 0% from 14%, according to CME’s FedWatch tool. The swap market now anticipates the possibility that the first rate cut will occur again in June, compared to July.
US Treasury yields saw a significant decline following the report, with yields falling more than 3%. The 10-year yield fell from 4.62% to 4.50%. Meanwhile, Wall Street stock markets hit new weekly all-time highs.
The combination of a weaker US dollar, lower Treasury yields, rising commodity prices and improving risk appetite boosted the AUD/USD pair above 0.6400. The pair remains near highs at 0.6450, with bullish momentum intact.
If the pair breaks above 0.6450, attention will focus on 0.6500, the last defense before the key resistance zone of 0.6520. This resistance level limited the rallies in late August, September and last week. Breaking above this level would open the doors to further rises.
Technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
