AUD/USD hits five-week high amid cooling down CPI reading

The AUD/USD pair gains 0.55%, trading at 0.6787 despite the US CPI data release. Fed is likely to delay rate hike as inflation cools down.

Futures suggest hike likelihood at 58.2% next month. Despite the ongoing RBA tightening cycle, AUD boosted by marginal gain in Consumer Confidence. The AUD/USD pair remains trading in the green territory, extending its rally to four straight days, but gave back some of its earlier gains following an inflation report in the United States.

Data released from Australia in the Asian session lifted the pair, but at the time of writing, it exchanges hands at 0.6783, up 0.55%. Inflation slowdown gives room for Fed’s pause; AUD/USD nears weekly high. The US Bureau of Labor Statistics released May inflation figures, with the Consumer Price Index (CPI) expanding 4% YoY, below estimates of 4.1% and the prior’s month 4.9%. Excluding volatile items, the so-called core CPI stood at 5.3% YoY, aligned with estimates, though it ticked 0.2% lower than April’s data.

Therefore, as inflation cools, the Fed can skip a rate hike in June to check the economic status before the July meeting. Money market futures estimate the Fed would raise rates 25 basis points (bps) to 5.25%-5.50% next month with chances standing at 58.2%, higher than a week ago.