The AUD/USD pair jumps close to the crucial resistance of 0.6800 in Thursday’s American session. The Aussie asset strengthens as the US Dollar (USD) plunges after the United States (US) Consumer Price Index (CPI) report showed that inflationary pressures cool down again in June. This has prompted expectations for the Federal Reserve (Fed) to start reducing interest rates from the September meeting.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, tumbles to near 104.00.

US annual core inflation, which excludes volatile food and energy prices, came in lower at 3.3% than estimates and May’s reading of 3.4%. In the same period, the headline inflation decelerated at a faster pace to 3.0% from expectations of 3.1% and the former release of 3.3%.

On month, headline inflation deflated by 0.1% and the core CPI grew at a slower pace of 0.2%. Soft inflation figures would deliver more confidence to Fed policymakers to discuss on an early return to the policy normalization process.

According to the CME FedWatch tool, 30-day Federal Fund Futures price data indicates that a rate-cut in September is a done deal. The probability for Fed rate cuts has increased to 89% from 74.4% recorded a week ago.

On the Asia-Pacific front, growing speculation that the Reserve Bank of Australia (RBA) will not cut interest rates this year has kept the near-term outlook of the Australian Dollar firm. The RBA would be one of the last to join the global rate-cut cycle as price pressures have revamped in Australia.

More By This Author: