The Australian Dollar (AUD) strengthened against the US Dollar (USD), with AUD/USD trading near the 0.7000 level on Wednesday. This move was driven by broad USD weakness following softer-than-expected US Producer Price Index (PPI) data for June. The US PPI declined 0.3% month-over-month, reversing May’s 0.6% increase and coming in below expectations for an unchanged reading. Annual producer inflation slowed to 5.5% from a revised 6.0%, missing the 6.2% market forecast. Core PPI rose 0.2% month-over-month, below the expected 0.4%, and the annual underlying rate edged up to 4.7% from 4.6%, still under the 5.2% consensus. These figures reinforced expectations that US inflation pressures may be easing, putting downward pressure on the Greenback [1].
Federal Reserve Bank of New York President John Williams commented that the June CPI report was consistent with the inflation progress he hopes to see in the coming months, but noted that policymakers do not have a clear direction on future interest rate moves [1]. Meanwhile, Brown Brothers Harriman’s Elias Haddad argued that the Dollar’s downside is likely limited after its post-CPI slide. He cited three main reasons: US economic outperformance, a higher-for-longer Federal Reserve policy stance, and strong foreign demand for US securities. Fed Chair Kevin Warsh reiterated the central bank’s commitment to the 2% inflation target, stating that the softer June CPI data does not mean the Fed’s mission is accomplished [2].
Supporting the USD, the US Treasury International Capital (TIC) data showed net foreign purchases of long-term US securities increased by $263 billion in May, the highest since November 2025, compared to $207 billion in April [2]. The upcoming Fed Beige Book and several Fed speeches are highlighted as key inputs for Dollar and rate expectations [2].
On the technical front, AUD/USD traded at 0.6996, maintaining a bullish near-term bias above both the 20-period and 100-period Simple Moving Averages. The pair was testing resistance at 0.6999, with the Relative Strength Index near 69, indicating strong but potentially stretched upside momentum. Immediate support levels were identified at 0.6993, 0.6987, and 0.6983, with further support at the 20-period SMA (0.6955) and 100-period SMA (0.6924) [1].
Chinese economic data also played a role, with Q2 GDP expanding 0.9% quarter-over-quarter (matching expectations but slowing from 1.3%), and annual growth at 4.3% (below the 4.5% forecast and previous 5.0%). However, Chinese Industrial Production rose 5.3% year-over-year in June (above the 4.6% forecast), and Retail Sales increased 1.0% after a previous 0.6% decline, supporting the China-sensitive Australian Dollar [1]. Equity markets were firmer, led by technology stocks and the semiconductor-heavy Kospi index, while the bond sell-off stabilized and the USD steadied after its initial slide [2].
CONCLUSION
Softer US inflation data has weighed on the US Dollar, allowing the Australian Dollar to strengthen, especially amid supportive Chinese activity data. However, analysts see limited further downside for the USD due to ongoing US economic strength, a committed Federal Reserve, and robust foreign demand for US assets. Market participants are now watching upcoming Fed communications for further direction.