Australian inflation higher than expected, Aussie extends losses

The Australian dollar has extended its losses on Wednesday. AUD/USD is trading at 0.6415 in the North American session, down 0.44% on the day.

Australia's inflation rate remained unchanged in April at 2.4% y/y for a third straight month, matching the lowest rate since Nov. 2024. The reading was slightly higher than the market estimate of 2.3% but remained within the central bank's inflation target of 2%-3%. Trimmed mean inflation, the central bank's preferred indicator for underlying inflation, edged up to 2.8% from 2.7% in March.

The inflation report was mildly disappointing in that inflation was hotter than expected. Underlying inflation has proven to be persistent which could see the Reserve Bank of Australia delay any rate cuts.

The markets have responded by lowering the probability of a rate cut in July to 62%, compared to 78% a day ago, according to the ASX RBA rate tracker. A key factor in the July decision will be the second-quarter inflation report in late July, ahead of the August meeting.

The Reserve Bank lowered rates last week by a quarter-point to 3.85%, a two-year low. The central bank left the door open to further cuts, as global trade uncertainties are expected to lower domestic growth and inflation.

The Federal Reserve releases the minutes of its May 7 meeting later today. At the meeting, the Fed stressed that it wasn't planning to lower rates anytime soon and the minutes are expected to confirm the Fed's wait-and-see stance.

US President Trump has been zig-zagging on trade policy, imposing and then cancelling tariffs on China and the European Union. Fed Chair Powell said at the May meeting that the economic uncertainty due to tariffs means that the appropriate rate path is unclear and that message could be reiterated in the Fed minutes.

• AUD/USD is testing support at 0.6417. Below, there is support at 0.6393
• There is resistance at 0.6460 and 0.6480