The Australian Dollar (AUD) extends its losses against the US Dollar (USD) on Wednesday for the third successive session. The AUD/USD pair loses ground after the release of the Monthly Consumer Price Index (CPI).

However, the Australian Bureau of Statistics reported that monthly inflation, in the price of a fixed basket of goods and services acquired by household consumers, steadied at 2.4% year-over-year in April, surpassing the expected 2.3% increase.

The AUD/USD pair depreciates as the US Dollar receives support from a dovish tone surrounding the US yields, driven by Japan's indication of potential cuts in government debt issuance, which has boosted global bond markets. At the time of writing, the 10- and 30-year yields on US Treasury bonds are standing at 4.46% and 4.97%, respectively.

The Reserve Bank of Australia (RBA) restarted its cutting cycle by delivering a 25 basis points rate cut last week.The Aussie central bank acknowledged progress in curbing inflation and warned that US-China trade barriers pose downside risks to economic growth.

National Australia Bank (NAB) expects the RBA to adopt a less dovish stance and continue to see the need for the central bank to return the cash rate to a neutral stance over the coming months. However, the NAB has lifted terminal rate expectation to 3.1% from the previous 2.6%.

The RBA is expected to deliver further interest rate cuts in the upcoming policy meetings, which could put a limit on the Australian Dollar's upside. Markets are pricing in a 65% odds of another rate cut in July, with expectations of a total 75 bps in easing by the first quarter of 2026.

Governor Michele Bullock stated that the central bank is prepared to take additional action if the economic outlook deteriorates sharply, raising the prospect of future rate cuts.

Source: Fxstreet