AUD Under Pressure: Rising Inflation and RBA Rate Cut Talks Shake Markets
The Australian dollar continued to fall after new data showed that people in Australia expect inflation to rise. According to the latest numbers, consumers now expect inflation to reach 4.2%, which is higher than the 3.8% they expected in December. This is also the highest level since September.
At the same time, the US dollar is staying strong. The Federal Reserve recently lowered its interest rates by 25 basis points to 4.25%–4.50%. However, the Fed also suggested that it may not lower rates much further in the near future. This keeps the US dollar firm and adds extra pressure on the Australian dollar.
Another reason for the Australian dollar’s drop is the growing belief that the Reserve Bank of Australia (RBA) might start cutting interest rates sooner than expected. If the RBA reduces rates, it could make the Australian dollar even weaker compared to other currencies.
In short, the Australian dollar is falling because of higher inflation expectations, strong US dollar performance, and possible rate cuts by the RBA.
Impact: The Australian dollar might remain weak if inflation expectations stay high. There is a chance the RBA could cut rates soon, which could possibly push the AUD even lower.