Home ForexForecasts AUD/USD: Australian dollar rises, wage growth falls lower

AUD/USD: Australian dollar rises, wage growth falls lower

by SuperiorInvest

The Australian dollar extended its gains on Wednesday. is up 0.24%, trading at 0.6642 in the European session at the time of writing.

Has wage growth in Australia peaked?

Australian wages rose less than expected in the first quarter, a sign that inflationary pressures may be easing.

The wage price index rose 0.8% quarter-on-quarter in the first quarter, below the revised 1% in the fourth quarter of 2023 and below the market estimate of 0.9%. This is the lowest gain since the fourth quarter of 2022. On an annualized basis, wages fell to 4.1%, compared to 4.2% in the fourth quarter and the market estimate of 4.2%.

Falling wage growth could be a sign that wage demands have peaked, suggesting inflation will ease over the course of the year. The Reserve Bank of Australia has projected that inflation, currently at 3.6%, will not fall within the 2-3% target band until 2025 and markets do not expect a rate cut before November this year. . Still, these forecasts will surely change if inflation falls faster than expected.

US CPI Next

All eyes are on today's US CPI report, which could shake the US dollar. The headline CPI is expected to fall to 3.4% year-on-year in April, down from 3.5% in March. On a monthly basis, the headline CPI is expected to remain unchanged at 0.4%. Core CPI, which is a better indicator of inflation trends, is expected to decline from 3.8% year-on-year to 3.6%, and month-on-month from 0.4% to 0.3%.

Federal Chairman Powell said Tuesday that inflation is falling more slowly than expected and that the Federal Reserve will continue to be patient and “let tight policy do its job.” Powell's comments were likely made with the CPI release in mind, as an attempt to quell any market exuberance if the CPI comes in lower than the estimate. Money markets widely expect the Federal Reserve to hold rates at its June meeting, with a rate cut valued at 32% in July and 67% in September, according to the CME FedWatch tool.

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AUD/USD Technical

  • AUD/USD is testing the resistance at 0.6445. Above, there is resistance at 0.6688
  • 0.6607 and 0.6559 are the next support levels

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