Australian Dollar drifts away from highs amid cooler inflation, weak employment data

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AUD/USD pulls back to the 0.6920 area, from two-week highs at 0.6950.
Soft Australian Inflation figures and a moderate decline in job advertisements have dented the Aussie's recovery.
Iranian authorities' comments about the status of the Strait of Hormuz are weighing on risk appetite on Monday.

The Australian Dollar (AUD) is trading moderately lower against the US Dollar (USD) on Monday, as cooler Australian inflation figures have eased pressure on the Reserve Bank of Australia (RBA) to hike interest rates further. The AUD/USD pair retreated to the 0.6920 area, from the two-week highs around 0.6050 reached on Friday, with the three-month lows of 0.6865 still at a short distance.

Earlier on Monday, the Australian TD-MI Inflation Gauge, released by the Melbourne Institute, revealed that price pressures contracted at a 0.4% pace in June, following a 0.3% drop in May, and eased to a 3.9% year-on-year rate, from 4-4% in the previous month.

At the same time, the ANZ Commodity Price index, a forward-looking indicator of prices for exporting goods, showed a 1% contraction in June, reversing a 0.7% growth in May. A few minutes later, Job Advertisements, also for June, revealed a 0.2% fall after an upwardly revised 2% growth in the previous month.

Australian data cements hopes of a RBA pause

These figures ease concerns about the inflationary pressures stemming from the Middle East conflict and give some respite to the Reserve Bank of Australia (RBA) to extend the “wait-and-see” phase to assess the economic impact of the interest rate hikes delivered in the first half of the year.

Apart from that, comments by Iranian authorities about the status of the Strait of Hormuz have soured sentiment, in an otherwise calm start of the week, adding some pressure on the risk-sensitive AUD.

In the US, the focus on Monday will be on the ISM Services Purchasing Managers’ Index, which is expected to have shown healthy business activity despite a moderate slowdown since May. Later on, Federal Reserve (Fed) Governor Christopher Waller might provide some further insight into the central bank’s monetary policy plans.

Economic Indicator

TD-MI Inflation Gauge (MoM)

The TD-MI inflation gauge, released by Melbourne Institute, is designed to provide a timely and accurate monthly measure of inflation in Australia. Based on the Australian Bureau of Statistics methodology for calculating the quarterly consumer price index, the Melbourne Institute Monthly Inflation Gauge estimates month-to-month price movements for a wide-ranging basket of goods and services across the main capital cities of Australia. The MoM figure compares the prices of goods in the reference month to the previous month. The higher the inflation, the stronger the effect it will have on the probability of an interest-rate hike by the RBA. Generally speaking, a high reading should be taken as positive, or bullish, for the AUD, while a low reading is seen as negative or bearish.

Economic Indicator

ANZ Job Advertisements

The ANZ job advertisements released by the Australia and New Zealand Banking Group Limited (ANZ) presents the number of job advertisements in the major metropolitan newspapers and on the internet sites. It is used for forecasting employment growth in Australia as it indicates future labor market conditions.A high reading is seen as bullish (or postive) for the AUD, whereas a low reading is seen as bearish (or negative).