Aussie edges lower as business confidence slips

The Australian dollar has declined by 0.28% on Tuesday. AUD/USD is trading at 0.6600 in the European session, down 0.16% on the day. On the data calendar, Australian NAB business confidence was weak and there are no economic releases out of the US.

Australian business confidence falls to six-month low

Australia’s NAB business confidence index slipped to -3 in May, down from a revised 2 in April and shy of the forecast of zero. This was the first negative reading since January and its worst performance since December 2023. The results suggest that sluggish economic conditions have continued into the second quarter.

It is difficult to see the business sector showing more optimism until the Reserve Bank of Australia delivers a rate cut, which might not happen until late in the year or early 2025. Inflation has been stubbornly high and Governor Bullock has said that if the downtrend in inflation stalls, the central bank could raise rates. This is an unlikely scenario but illustrates that the RBA remains hawkish and rate cuts are not around the corner.

Wednesday will be busy in the US, with the release of the May inflation report and the Fed rate announcement. Headline CPI is expected to remain unchanged at 3.4% y/y while Core CPI is projected to drop from 3.6% to 3.5%. . Inflation remains a headache for the Federal Reserve as bringing it down to the 2% target as proven elusive.

The Fed is virtually certain to hold the benchmark rate at 5.25% to 5.50% and the markets will be looking for clues as to future rate cuts. A quarter-point cut in September is around a 50/50 likelihood, according to the CME FedWatch.

AUD/USD Technical

• AUD/USD is putting pressure on resistance at 0.6619. Above, there is resistance at 0.6660.
• 0.6540 and 0.6499 are the next support levels

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.