AUD Bounces Back as Greenback Falters Amid RBA Rate Cut and US Inflation Data

The Australian Dollar (AUD) staged a notable recovery against the US Dollar (USD) on Tuesday, climbing above the 0.6500 threshold and erasing early losses. This rebound was driven by a weakening US Dollar, which overshadowed the Reserve Bank of Australia’s (RBA) recent decision to cut interest rates. By the American trading session, the AUD/USD pair was hovering around 0.6530, reflecting the market’s response to mixed US inflation data and political turbulence impacting the Greenback.
The RBA announced a 25-basis-point cut to its cash rate, bringing it to 3.60%. The central bank cited cooling inflation, which is nearing its 2-3% target range, and a softening labor market as key factors behind the decision. Despite the rate cut typically being a headwind for the AUD, the currency found support as the US Dollar weakened broadly, influenced by both economic and political developments in the United States.

US inflation figures released by the Bureau of Labor Statistics added complexity to the market dynamics. The July Consumer Price Index (CPI) rose by 0.2% month-on-month, aligning with expectations but slowing from June’s 0.3% increase. On an annual basis, headline CPI held steady at 2.7%, slightly below the forecasted 2.8%. However, Core CPI, which strips out volatile food and energy prices, climbed 0.3% month-on-month, surpassing estimates of 0.2%. The annual core reading also ticked higher to 3.1% from 3.0%, exceeding market expectations and signaling persistent underlying price pressures.

Compounding the US Dollar’s woes, political noise further weighed on the Greenback. President Donald Trump took to Truth Social to express discontent with Federal Reserve Chair Jerome Powell, hinting at a potential lawsuit against him and even criticizing the Fed’s building projects. These remarks sent ripples through the markets, pushing the US Dollar Index (DXY) toward a two-week low near 98.00. The combination of mixed inflation data and political uncertainty created a perfect storm for the Greenback’s decline, allowing the Australian Dollar to capitalize and regain ground.

As the AUD/USD pair continues to navigate these crosscurrents, investors are closely monitoring upcoming economic data and central bank signals. For now, the Australian Dollar’s resilience highlights the complex interplay of global monetary policies and domestic economic indicators, with the Greenback’s softness providing a temporary boost to the AUD’s recovery.