- AUD/USD falls as market expectations for further RBA interest rate hikes fall.
- Soft inflation, weak spending, and a cooling labor market suggest past RBA rate hikes have successfully slowed the economy.
- The US Dollar could surge if Washington and Tehran fail to finalize the ceasefire extension.
AUD/USD inches lower after opening at a bullish gap, remaining within the positive territory and trading around 0.7160 during the Asian hours on Friday. The currency pair faces downward pressure as the Australian Dollar (AUD) struggles with a sharp reduction in market expectations for further interest rate hikes by the Reserve Bank of Australia (RBA).
Traders are reacting to a cluster of economic indicators, including a softer-than-expected April inflation reading, weak consumer spending data, and a cooling labor market, which suggest that earlier RBA monetary tightening is successfully working its way through the economy. Consequently, market participants have aggressively cut the odds of a June rate hike, and traders are now turning their attention to next week's manufacturing PMI survey, trade balance numbers, and key GDP figures for further clarity on Australia's economic health.