AUD/USD toys with ten-month high ahead of US CPI inflation print

• AUD/USD tested a ten-month peak on Wednesday as the Aussie continues to climb.
• The Australian Dollar gained another half-percent as markets lean into Fed rate cut bets.
• The latest round of US CPI inflation is unlikely to shift the Fed away from a cut, but could still complicate policy.

AUD/USD rose into its highest bids in ten months on Wednesday, tapping the 0.6635 region for the first time since November of last year. The Aussie caught a firm bid through the day, driven by a general buoyancy to market risk appetite. The Federal Reserve (Fed) is on rails, heading toward a September rate cut after this week's US Producer Price Index (PPI) inflation print showed that US businesses are not facing inflation pressures, at least not domestically.

Chinese CPI inflation eased in August, which is hardly surprising. Chinese inflation metrics are driven entirely by domestic demand, which has continued to stumble through several stimulus projects by the Chinese government. The next round of US CPI inflation is due on Thursday, and is expected to show another uptick in headline consumer-facing inflation. With tariff pressures and the end of small-scale shipping de minimis exemptions, ongoing consumer-level inflation pressures are certainly unsurprising.

The trading week will wrap up with another round of the University of Michigan Consumer Sentiment Index, which is expected to tick down to 58.0 from 58.2. Michigan 1-year and 5-year Consumer Inflation Expectations continue to run high, with the 1-year last clocking in at 4.8% and the 5-year horizon still holding at 3.5%.

AUD/USD daily chart