Australian dollar climbs on higher consumer confidence and soft US inflation

The Australian dollar has rebounded with strong gains on Tuesday. In the North American session, AUD/USD is trading at 0.6427, up 0.87% on the day. This follows losses of 0.67% a day earlier.

Australia consumer sentiment rebounds

Australia's Westpac Consumer Sentiment climbed 2.2% to 92.1 in May, bouncing back from a 6% plunge in April. Consumers showed increased confidence in purchasing a major appliance and unemployment expectations fell. The survey follows a recovery in the financial markets and comes after the Australian election in which Labor cruised to an easy victory.

The NAB Business Confidence Index improved to -1 in April, up from -2 in March and its highest level since January. Business conditions and confidence remain weak, weighed by uncertainty over the US tariffs, which could have a disastrous effect on Australia's export-reliant economy.

US inflation lower than expected

US headline CPI rose in April to 0.2% from -0.1%, below the market estimate of 0.3%. Annually, headline CPI dipped to 2.3% from 2.4%, shy of the market estimate of 2.4%. This was the lowest annual inflation rate since February 2021 and was driven by a decline in energy prices. Core CPI rose to 0.2% from 0.1%, below the market estimate of 0.3%. Annually, the core rate was unchanged at 2.8%, in line with expectations and remaining at a four-year low.

Inflation remains contained but consumers are anxious that US tariffs have increased pricces and are hurting the economy. The Fed is also concerned about the effect of tariffs as it tries to chart a rate path. The Fed maintained rates last week and is widely expected to hold again at the June meeting.

AUD/USD Technical

• AUD/USD has pushed above resistance at 0.6397. Above, the next resistance line is 0.6436
• 0.6332 and 0.6293 are the next support levels