AUD/USD tumbles to near 0.6350 after hot US headline inflation data

The AUD/USD pair drops vertically below the round-level support of 0.6400 as the United States inflation report for September showed that headline Consumer Price Index (CPI) rose more than expectations due to higher gasoline prices.

The S&P500 turns volatile after hot headline inflation data while core CPI softens as expected.  The monthly headline consumer inflation rose by 0.4% while investors forecasted a growth rate of 0.3%. In August, the economic data grew by 0.6%.

Meanwhile, the underlying consumer prices expanded at a 0.3% pace as forecasted. The annual core CPI decelerated to 4.1% as expected. Last month, the economic data was recorded at 4.3%. The consistent decline in core inflation and deepening Middle East tensions are expected to allow the Federal Reserve (Fed) to keep the interest rates unchanged at 5.25-5.50%.

The US Dollar Index (DXY) soars to near 106.30 on expectations that progress on the road to price stability would slow. The 10-year US Treasury yields recovered losses and jumped to 4.62%. Meanwhile, Fed policymakers supported for keeping interest rates unchanged as rising US Treasury yields would decline spending and investment ahead.

Apart from that, weekly jobless claims remained almost unchanged last week. Individuals claimed jobless benefits for the week ending October 6 remained steady at 209K, a little lower than expectations of 210K.

On the Australian Dollar front, investors await one-year forward consumer inflation expectations which will be published on Friday. As per the expectations, the economic data is seen rising to 4.8%, against the former release of 4.6%. This could force Reserve Bank of Australia (RBA) policymakers to deliver one more interest rate hike by 25 basis points (bps) to 4.35% by the year-end.