The Australian Dollar (AUD) weakened against the US Dollar (USD) on Thursday, with the AUD/USD pair extending its decline for a second straight session and falling to its weakest level since September 5.

This decline occurred as the greenback surged across the board after a series of stronger-than-expected US economic data bolstered confidence in the resilience of the world's largest economy and dampened risk sentiment.

At the time of writing, AUD/USD was trading near 0.6536, down 0.70% on the day. Meanwhile, the US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, was hovering around 98.55, marking its strongest level in more than three weeks.

The Bureau of Economic Analysis revised second-quarter Gross Domestic Product (GDP) higher to 3.8% annualized from 3.3%, beating estimates. The report also showed the core Personal Consumption Expenditures (PCE) price index rose to 2.6% from 2.5%, underscoring strong inflationary pressures. At the same time, Durable Goods Orders rebounded 2.9% in August, while weekly Initial Jobless Claims fell to 218,000, below expectations of 235,000.

Today's data reinforces the Federal Reserve's (Fed) balancing act between containing inflation and supporting the labor market. Although officials have emphasized that policy is already "quite restrictive," the combination of stronger GDP growth and strong quarterly inflation suggests there is no urgency to accelerate interest rate cuts. Instead, attention now turns to Friday's core PCE inflation report.

In Australia, the latest monthly Consumer Price Index (CPI) for August showed inflation edged up to 3.0% year-on-year from 2.8% in July. This data was released ahead of the Reserve Bank of Australia's (RBA) monetary policy meeting on September 30, where the benchmark interest rate is expected to remain at 3.60%. Market pricing indicates a very slim chance of a rate cut next week, with most economists at major banks expecting the next rate cut to occur in November. (alg)

Source: FXstreet