- Australia is set to release inflation expectations on Thursday in June, which could impact interest rate predictions.
- The US is expected to announce its producer price index data for May, offering insights into wholesale inflation trends.
- AUD/USD may be affected by these economic reports, influencing rate expectations and consumer confidence.
The Australian Dollar (AUD) slipped against the US Dollar (USD) on Wednesday, losing earlier gains amid developments in US-China trade discussions.
Inflation reports might continue to increase prices, with AUD/USD trading below the key support level of 0.6500 as of this writing.
Focus on Australian inflation expectations and US PPI
On Thursday, Australia will announce consumer inflation expectations for June, reflecting what consumers anticipate for inflation over the coming year.
Attention will be on whether these expectations have shifted from the May figure of 4.1%. Meanwhile, in the US, following last week’s count of 247,000, initial unemployment claims are expected to rise to 240,000 for the previous week.
The market is also keenly awaiting the US Producer Price Index (PPI) for May, which gauges wholesale inflation. After a 0.5% contraction in April, May’s monthly PPI is forecasted to increase to 0.2%.
The annual PPI rate is expected to climb to 2.6%, up from 2.4% last month. The annual core PPI rate, which excludes more volatile food and energy prices, is anticipated to hold steady at 3.1%.
Interestingly, the May Consumer Price Index (CPI) revealed an unexpected drop, with both monthly and annual figures falling short of forecasts. These outcomes might influence market expectations regarding the Federal Reserve’s policy direction.
AUD/USD drops below 0.6500
The AUD/USD pair is currently below the 61.8% Fibonacci retracement level, which dropped from September to April, sitting around 0.6549. It’s currently under 0.6500.
The 20-day Simple Moving Average (SMA) has been an ongoing support, maintaining a short-term trend near 0.6463.
On another note, the 200-day SMA, which is around 0.6430, is a crucial medium-term support level.
AUD/USD Daily Chart
Breaking above 0.6545 could pave the way toward 0.6722, which aligns with a 78.6% Fibonacci retracement.
Conversely, a failure from the ongoing wedge pattern might see retracements as deep as 0.6428 (the 50% Fibonacci level) or possibly lower, like November’s lows.
Future price movements will be crucial in determining if bullish momentum can sustain itself—or if a downturn is on the horizon.
Economic indicators
Consumer inflation expectations
Released by the Melbourne Institute, these expectations reflect consumer predictions for inflation over the next year. Higher expectations tend to bolster the likelihood of a rate hike by the RBA, meaning strong readings for the AUD could be seen as positive, while lower expectations may be viewed negatively.
Next release:
June 12, 2025 01:00
Frequency:
Monthly
Consensus:
–
Previous:
4.1%
Inflation FAQ
Inflation measures price increases for a common basket of goods and services. Headline inflation is usually reported as monthly and year-over-year (YOY) changes, while core inflation excludes more unstable factors like food and fuel. Economists often focus on core inflation, which central banks aim to manage, typically around 2%.
The Consumer Price Index (CPI) reveals price changes in a basket of goods over time, expressed as percentage changes monthly and YOY. Core CPI, a figure targeted by central banks, excludes volatile food and energy prices. If core CPI exceeds 2%, interest rates generally rise, while they tend to dip below 2%.
Surprisingly, high inflation tends to enhance currency value. This occurs because central banks typically raise interest rates to counteract inflation, attracting global investments seeking better returns.
Gold has traditionally been a safe haven for investors during high inflation periods, though this isn’t always the case. Rising inflation prompts central banks to increase interest rates, making gold less attractive. In contrast, lower inflation usually supports gold prices due to falling interest rates.
