FX.co ★ Aussie Dollar Firms Despite Softer Inflation Data

On Wednesday, the Australian dollar appreciated to approximately $0.650, marking its third day of consecutive gains despite reporting inflation figures that were softer than anticipated. The headline Consumer Price Index (CPI) increased by 2.1% year-on-year in May, down from 2.4% in the previous three months and falling short of market predictions of 2.3%. Core inflation declined to 2.4% from 2.8%, marking the lowest rate since November 2021, and maintaining price pressures within the Reserve Bank of Australia's target range of 2–3%. Along with weaker-than-expected Gross Domestic Product (GDP) data, these statistics have intensified market expectations for a 25 basis points rate reduction by the RBA in July, with an 89% probability currently being priced in and a total of 73 basis points of cuts anticipated by year’s end. Additionally, the Australian dollar received a boost from improved risk sentiment following US President Trump's announcement of a ceasefire between Iran and Israel. Nonetheless, caution persists as intelligence reports suggest recent US missile strikes did not fully eliminate key Iranian nuclear sites, raising questions about the ceasefire’s longevity.