AUD/USD extends losing streak as markets brace for Australian CPI and jobs figures

AUD/USD finished lower last week at 0.7014 (-0.45%), marking its fourth weekly loss in the past six, ahead of this week’s critical Australian inflation and employment data. The Aussie came under pressure from a double whammy last week. At home, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 4.35% after three consecutive 25 basis point (bp) hikes earlier this year. While the statement retained a hawkish bias, Governor Bullock struck a slightly more balanced tone in the press conference, noting that a rate hike was not discussed and repeatedly qualifying further tightening with ‘if required’. By contrast, last week’s Federal Open Market Committee (FOMC) meeting delivered a hawkish surprise under new Chair Kevin Warsh. The updated dot plot showed nine officials now expecting at least one rate hike by the end of 2026, while the statement removed previous easing language. Warsh was notably direct in his press conference, repeatedly stressing ‘price stability’ and signalling that he wants markets to react to the data rather than front-run policy. Markets responded aggressively, pricing in a full 25 bp Federal Reserve (Fed) hike by September and two Fed hikes by March 2027. This combination of a slightly more dovish -leaning RBA and a hawkish Fed resulted in a further narrowing of the yield advantage the Aussie enjoys over the greenback. As can be seen in the chart below, the yield on the Australian 10-year bond , currently at 4.81%, now holds just a 32 bp premium over its United States (US) counterpart at 4.49%, down significantly from the 63 bp premium in mid-May, before the run of softer Australian data commenced. Upcoming key reports Looking ahead, AUD/USD will be driven by Wednesday’s May consumer price index (CPI) report and Thursday’s labour force report, both previewed below. From the US perspective, further updates from the Middle East talks and Thursday night’s core personal consumption expenditures (PCE) inflation data will be key influences. CPI May Date: Wednesday, 24 June, at 11.30am AEST April’s CPI data saw some cooling, with headline inflation falling to 4.2% year-on-year (YoY), down from 4.6% in March. The RBA’s preferred measure of inflation, the trimmed mean, edged higher to 3.4% from 3.3%. The market is looking for the headline CPI rate to bounce back to 4.3% YoY, while the RBA’s preferred trimmed mean measure is likely to tick higher to 3.5% from 3.4%. Labour force May Date: Thursday, 25 June, at 11.30am AEST Last month, the April employment report delivered a softer-than-expected outcome, with the number of employed people falling by 18,600, well below the roughly +15,000 consensus forecast. At the same time, the unemployment rate rose 0.2 percentage points to 4.5%, the highest level since late 2021, as the participation rate eased slightly to 66.7% from 66.8%. Looking ahead to the May update, consensus expects a rise in employment of 32,500, with the unemployment rate expected to tick lower to 4.4% from 4.5% prior. In summary The read-through here is that a hotter inflation print combined with a solid rebound in jobs would undoubtedly keep the door wide open for further RBA rate hikes before year-end. Conversely, cooler readings across both releases would add serious weight to the view that the RBA’s current policy setting is restrictive enough. The interest rate market starts this week pricing in 6 bp of rate hikes for the RBA’s August meeting, with a cumulative 15 bp of RBA rate hikes priced for the remainder of 2026. AUD/USD technical analysis Technically, the head-and-shoulders topping pattern in AUD/USD we highlighted here and here in early June continues to evolve. While the pair remains below the broken neckline at 0.7080 - 0.7000ish, there is scope for the move lower to extend towards the measured head and shoulders top projection around 0.6875. That said, a sustained break back above 0.7080 - 0.7000ish would signal that the pullback is complete and the broader uptrend has resumed.