The AUD/USD pair has seen a rise to 0.6620 in the New York session on Tuesday. This increase comes amidst a positive market mood and a decrease in the value of the US Dollar. This shift in the forex market has led to a strengthening of the Aussie asset, as the US Dollar Index (DXY) falls close to the crucial support level of 105.00.
Despite the release of stubborn US Producer Price Index (PPI) data for April, the US Dollar failed to gain traction. The annual headline and core PPI data, in line with estimates, grew by 2.2% and 2.4% respectively. However, the monthly figures saw a strong increase of 0.5%, surpassing both consensus and previous readings. The rise in producer inflation has been attributed to various factors such as escalating input prices, increased household spending, or a combination of both.
Investors have maintained a positive sentiment, choosing to overlook uncertainties surrounding the upcoming US Consumer Price Index (CPI) data release on Wednesday. The S&P 500 index has opened on a slightly bullish note, reflecting this optimism. The persistently higher-than-expected US inflation data in the first quarter of the year could impact Fed rate-cut expectations for the rest of the year.
On the Australian Dollar front, investors are eagerly awaiting the release of the Q1 Wage Price Index data on Wednesday. Forecasts predict a steady growth of 0.9% quarterly and 4.2% annually. Consistent wage growth could potentially increase inflationary risks, prompting the Reserve Bank of Australia (RBA) to maintain a tight interest rate policy for an extended period.
The recent movements in the forex market have shown a shift in favor of the Australian Dollar against the US Dollar. While US economic data continues to play a crucial role in shaping market sentiment, factors such as wage inflation in Australia also contribute to the overall dynamics of the currency exchange rate. As investors keep a close eye on upcoming data releases and central bank policies, the AUD/USD pair is expected to remain volatile in the near term.