- AUD/USD holds at 0.6624, resisting pressure from Powell’s hawkish stance after US PPI rises 0.5% MoM.
- Higher April PPI fuels concerns over extended inflation; Powell’s confidence in disinflation wanes, foresees 2% GDP growth.
- Australia’s 2024-25 budget returns to deficit; ANZ cites fiscal easing of 0.25-0.5% GDP.
- Key Australian data ahead: Wage Price Index expected stable at 0.9% QoQ, 4.2% YoY.
The Australian Dollar registered gains against the US Dollar on Tuesday, even though inflation in the United States (US) edged, spurring hawkish remarks by Fed Chair Jerome Powell. The AUD/USD trades at 0.6624, virtually unchanged as Wednesday’s Asian session commences.
AUD/USD holds above 0.6600 as markets await Australia’s Wage Price Index
Federal Reserve Chair Jerome Powell hit the wires after releasing the Producer Price Index (PPI). He said that, although he anticipates inflation to continue declining, he is less confident about the disinflation outlook than he was previously. Powell also noted that the Gross Domestic Product (GDP) is expected to grow by 2% or more, attributing this positive forecast to the strength of the labor market.
Meanwhile, the US Bureau of Labor Statistics (BLS) revealed the Producer Price Index (PPI) rose by 0.5% MoM in April, above the 0.3% consensus and March’s -0.1% contraction. Core PPI also jumped by 0.5% MoM, above projections of 0.2%.
On Australia’s front, the budget for 2024-25 returns to a deficit after printing a surplus of $9.3 billion in 2023-24. ANZ analysts commented, “The amount of net new spending in 2024-25 ($9.5bn) is consistent with our previously expressed view that the Budget would contain a discretionary fiscal easing equivalent to around ¼ to ½% of GDP in that year.”
In the meantime, the Aussie’s economic docket will feature the release of the latest Wage Price Index (WPI), which is expected to remain steady at 0.9% QoQ and 4.2% YoY.
AUD/USD Price Analysis: Technical outlook
In the short term, the pair is neutral to upward biased, trading near this week’s high. Bulls are eyeing a break of the May 3 daily high of 0.6648, which could pave the way for further gains.
In that outcome, the next key resistance level would be 0.6700, followed by the year-to-date (YTD) high of 0.6728. Once surpassed, up next would be the December 28 high of 0.6871
Conversely, if sellers drag the AUD/USD exchange rate below 0.6600, look for a pullback beneath the 100-day moving average (DMA) at 0.6569, followed by the 50-DMA at 0.6546. Once cleared, the next stop would be the 200-DMA at 0.6521.
