Market Data 
- AUD/USD struggles to gain strength despite the US Dollar corrects after the release of the US annual PPI report for August.
- Investors see the Fed reducing interest rates by 25 bps next week.
- Growing worries over Australian economic prospects have prompted the need of RBA rate cuts.
The AUD/USD pair strives for strong buying interest to extend its upside to near 0.6700 in Thursday’s North American session. The Aussie asset struggles to gain strength despite the release of the softer than expected United States (US) annual Producer Price Index (PPI) data for August.
The PPI report showed that the annual headline PPI grew at a slower pace of 1.7% from the estimates of 1.8% and from 2.1% in July, downwardly revised from 2.2%. In the same period, the core producer inflation – which excludes volatile food and energy prices – rose steadily by 2.4%, slower than expectations of 2.5%. A slower pace in the price increase of goods and services at factory gates suggest a sluggish consumer spending trend, which generally prompts Federal Reserve (Fed) interest rate cut bets.
However, the monthly headline and core PPI rose at a faster-than-expected pace of 0.2% and 0.3%, respectively. Soft US annual PPI data has weighed on the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower to near 101.60.
The impact of the US PPI is expected to be lower on market speculation for Fed interest rate guidance. The central bank is almost certain to start reducing its borrowing rates gradually from next week as the Wednesday’s Consumer Price Index (CPI) data for August showed signs of stickiness in inflationary pressures.
Meanwhile, the Australian Dollar (AUD) struggles to gain strength amid growing concerns over the Aussie economic growth due to the maintenance of higher interest rates by the Reserve Bank of Australia (RBA). Deepening economic worry has also forced market experts to discuss over RBA’s pivot to policy-easing.
Former RBA Governor Bernie Fraser criticized the current Monetary Policy Committee (MPC) for being overly focused on inflation at labour market’s cost. Fraser advised to lower the Official Cash Rate (OCR), warning of “recessionary risks” that could have severe consequences for employment.
Economic Indicator
Producer Price Index (YoY)
The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).
