AUD/USD declines after US CPI data

The AUD/USD saw a loss of 0.30% and dropped below the 0.6700 mark. Declining US CPI in December reduced dovish Fed bets. The pair’s downside is constrained because there is a good chance the Fed will lower rates in March.

On Thursday, the Australian dollar declined in value relative to the US dollar, with the two currencies trading close to the 0.6685 level.

The unexpectedly strong Consumer Price Index (CPI) data from the US, which caused dovish bets on the Federal Reserve (Fed) soften, has been a major driver to this negative movement.

The Consumer Price Index (CPI) increased 3.4% YoY in December, according to the US Bureau of Labour Statistics, above the 3.2% forecast. Additionally, the monthly CPI growth increased by 0.3%, above the 0.2% estimate.

November’s Core CPI dropped from 4% to 3.9%. Investors are still banking on more than 50% chance of a drop in March and May, which would leave the target rate at 450–475 basis points by June, even though there has been a slight relaxation of their dovish bets on the Fed.