The Australian dollar weakened slightly on Thursday after strengthening in the previous session. The AUD/USD pair still has room to recover as the US dollar faces pressure following weaker-than-expected US PPI data, which reinforced expectations of Fed easing in September.

Domestically, the AUD received support as solid Australian data reduced expectations for further interest rate cuts by the RBA. The swap market now rates an ~86% chance of the RBA holding rates this month.

Australian Consumer Inflation Expectations rose to 4.7% in September from 3.9% in August, reflecting stronger domestic demand while raising concerns about renewed inflationary pressures. RBA Governor Michele Bullock assessed that the private sector is starting to show "a little more growth," which is positive for the economy.

Now the spotlight turns to the US August CPI (released tonight WIB). Consensus projects 2.9% YoY for the headline and 3.1% YoY for the core. A higher reading could boost the USD and pressure the AUD, while a lower reading could open up room for a rebound in the AUD. The market has already priced in a 25 bps cut by the Fed, with the likelihood of a 50 bps cut still small.

Source: Newsmaker.id