Australian Dollar languishes around 0.6900 with US inflation data in the spotlight

AUD/USD is struggling to take off from seven-month lows at 0.6885, following a 2.5% drop in the last eight days.
The US Dollar consolidates near mid-term highs on Thursday as investors await US PCE inflation data.
Australian Unemployment rate declined in May amid higher-than-expected employment creation.

Guillermo Alcala FXStreet

The Australian Dollar (AUD) remains stuck near two-month lows against the US Dollar (USD) on Thursday, consolidating losses after plummeting about 2.5% in an eight-day losing streak. The positive Australian employment figures have failed to support the pair, with investors wary of selling the USD ahead of the US Personal Consumption Expenditures (PCE) Price Index figures, due later on the day.

The US Federal Reserve's (Fed) inflation gauge of choice is expected to show that price pressures accelerated further in May, adding to the case of an interest rate hike later this year. Headline PCE inflation is seen accelerating to a three-year high of 4.1%, from 3.8% un April, with the core reading ticking up tp 3.4% in the 12 months to May, from 3.3% in the previous month.

Markets are pricing a Fed rate hike in October

Data from the CME Fed Watch Tool shows that futures markets are pricing above 30% chances of a quarter-point rate hike next month, up from 17% one month ago, while the odds for a hike in September have risen to 65% from 40% last month. This is underpinning support for the US Dollar.

In the Geopolitical front, comments from US officials show optimism about a swift end to the conflict, although the uncertainty about the status of the Strait of Hormuz and Iran’s nuclear program remains high, keeping investors cautious and risk-sensitive assets, like the AUD, subdued so far.

Against this background, the positive Australian employment data released earlier on the day has passed practically unnoticed. The Unemployment Rate declined to 4.4% in May from 4.5% in April, amid a 40.3K increase in net employment, beating market expectations of a 25K rise and reversing the 40.7K April drop.

These figures back the Reserve Bank of Australia’s forecasts, hinting at a tighter labour market in the coming months and leaving the door open to further interest rates if inflationary pressures remain above target.

Economic Indicator

Personal Consumption Expenditures - Price Index (YoY)

The Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

GBP/USD fails to reclaim 1.3200 as focus shifts to US data

GBP/USD loses its traction and declines toward 1.3150 following a short-lasting recovery attempt to the 1.3200 region in the early European session. The potential upside for the pair appear limited amid UK political instability and rising expectations of US interest rate hikes this year. Traders await the US May PCE inflation data on Thursday for a clear direction.

EUR/USD drops below 1.1350 ahead of US PCE inflation

EUR/USD struggles to stage a rebound and trades in negative territory below 1.1350 on Thursday. The cautious market stance helps the US Dollar holds its ground and weighs on the pair as market focus shifts to US PCE inflation report for May.

Gold struggles to stabilize above $4,000

Gold stays on the back foot after suffering heavy losses on Wednesday and trades below $4,000 on Thursday. The commodity sticks to its bearish bias for the third straight day, and remains close to the lowest level since November 2025, touched on Wednesday, as traders await the crucial US inflation data.

Bitcoin tests $60,000 as whales sell off – Aave and Jupiter show resilience

The broader cryptocurrency market remains under intense selling pressure, with Bitcoin back at $60,000 for the third time this year. On-chain data shows selling pressure from large-wallet investors, commonly referred to as whales, while total liquidations hit nearly $1 billion in 24 hours.

Bitcoin nears make-or-break level ahead of US PCE data

Bitcoin recovers slightly, trading at $61,700 after reaching a new yearly low of $59,103 and a 21-month low the previous day. This bearish price action is supported by the ongoing institutional sell-off, which recorded an outflow of over $469 million on Wednesday.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.