AUD/USD tumbles on strong US CPI, Fed rate cut hopes diminish

AUD/USD falls 1.18% to a 2024 low of 0.6442 after US inflation data strengthens Fed's rate position.
US CPI at 3.1% YoY and core inflation at 3.9% exceed forecasts, driving Treasury yields higher.
Dollar Index nears three-month high at 104.96, with eyes on surpassing the 105.00 level.
Fed easing expectations shift to June, as per CME FedWatch Tool, after inflation report.

The AUD/USD edged lower on Tuesday amid a strong US inflation report that pushed aside expectations rate cut expectations of the US Federal Reserve. Therefore, the pair dropped 1.18%, trading at around 0.6455 after hitting a new year-to-date (YTD) low of 0.6442.

Aussie Dollar’s hit a YTD low as the Greenback rallies on high US T-bond yields

The US January Consumer Price Index (CPI) was higher than expected, at 3.1% YoY, justifying the Fed's need to keep rates at the current level. Core readings came at 3.9% YoY, unchanged but above the 3.7% estimated. Following the data, US Treasury yields skyrocketed, lifting the Greenback towards a three-month high, according to the US Dollar Index (DXY).

The DXY is rising 0.70%, up at 104.96, shy of achieving a daily close above 105.00, which could open the door for further upside.

Rate cut estimates for the Fed were pushed back, revealing data from the CME FedWatch Tool. Traders expect the beginning of the easing cycle in June, with odds above 50%. Meanwhile, investors took advantage of the table rate cuts for the March and May meetings, which bolstered the US dollar.

In Australia, the economic schedule is empty, but traders are looking forward to the release of employment figures. Forecasts suggest the economy added 30,000 jobs to the workforce. The unemployment rate is expected to rise from 3.9% to 4%.

AUD/USD Price Analysis: Technical outlook

After clocking a new cycle low below 0.6468, the downtrend remains intact, which opened the door to challenging the 0.6400 figure. A breach of the latter will expose the November 10 low of 0.6338, followed by the 0.6300 mark. Conversely, if buyers reclaim 0.6500, that will pave the way for consolidation within the 0.6500-0.6535, the 100-day moving average (DMA) resistance level.

UK CPI Preview: Inflation expected to mostly stay stubbornly high in January

Pound Sterling traders keenly await the release of the high-impact Consumer Price Index (CPI) data from the United Kingdom (UK) on Wednesday, for fresh hints on the timing of the Bank of England’s (BoE) first interest rate cuts this year, as the BoE policymakers continue to push back against expectations of early rate cuts.

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Japan’s Top FX Diplomat Kanda: MOF will take appropriate steps on FX as needed

Japan's top currency diplomat Masato Kanda, who will instruct the BOJ to intervene, when he judges it necessary, warned that recent movements in the foreign exchange market have been rapid, and authorities stand ready to take steps in the market if needed, per Bloomberg.