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The Australian Dollar could be higher, were it not for soft domestic statistics.
A supportive global backdrop met encouraging news for Australians as the monthly inflation survey surprised to the downside in May.
Headline inflation dropped from 2.4% year-on-year to 2.1%, and the consensus forecast was for a fall of 2.3%. The ABS meanwhile reported trimmed mean inflation - which the Reserve Bank of Australia watches closely - fell to 2.4% from 2.8%.
Services inflation recorded a decline from 4.1% to 3.3%, having been on an upward path in recent months. Falling services inflation means the 'stickiness' in headline inflation is set to recede.
This good news for ordinary Australians is, however, not a helpful development for those wanting a stronger currency.
The monthly inflation measure indicates a softer quarterly reading in the pipeline, that can allow the Reserve Bank of Australia to be more confident that it can afford to cut interest rates further.
Lower rates down the road mean a softer Australian Dollar now.
"There is little reason for the RBA to not lower rates further in July. A cash rate at 3.60% would still be modestly restrictive, and the labour market appears to be softening a little," says David Forrester, FX Strategist at Crédit Agricole.
The Pound to Australian Dollar exchange rate reflects this, as it is only lower by 0.10% on the day at 2.0958, and we would have expected a more substantial move given the improved sentiment amongst the world's investors following the Iran-Israel ceasefire.
The Euro to Aussie Dollar is down 0.15% at 1.7861, and against the U.S. Dollar, the Aussie is up on the day at 0.6497.
Above: GBP/AUD (top) and AUD/USD.
"For AUD/USD, the soft inflation data will keep it locked in its 0.6350-0.6550 range. While the Australian rates market was already aggressively priced for further rate cuts meaning soft inflation will not be much of a drag on the exchange rate, AUD/USD likely needed strong inflation data to push it out of the top of its range," says Forrester.
The Aussie Dollar rebounded over the past 24 hours, helped by the ceasefire in the Israel-Iran conflict that means a series of worst-case outcomes for the global economy is set to be avoided.
The recovery in stock markets indicates an improved morale amongst traders, which naturally supports the Aussie. However, the domestic data looks to be denting its rebound prospects.