AUD/USD continues rising after US core PCE beats estimates with fifth up-day in a row

• AUD/USD extends rally after US core PCE beats estimates 
• The lack of a reaction may be as a result of the US Dollar already pricing in inflationary GDP data on Thursday. 
• Higher Australian factory gate inflation data overnight added a tailwind to AUD/USD.  

AUD/USD trades in the 0.6540s as it continues rallying after the release of US core Personal Consumption Expenditures Price (PCE) Index data for March. Despite the data showing a higher than expected rate of inflation, the US Dollar (USD) shows little reaction in most pairs, including AUD/USD, which looks like it will clock up its fifth daily gain in a row assuming a bullish close on Friday. 

US core PCE came in at 2.8% YoY in March – higher than the 2.6% expected and the same as the 2.8% previous, whilst headline PCE rose 2.7%, which was higher than the 2.6% expected and 2.5% previous. On month, the PCE data came out in line with expectations. 

The US Dollar’s lack of reaction could be put down to its already pricing in inflationary GDP data for the first quarter on Thursday, which pre-empted the inflationary core PCE data. 

Although the rate of US GDP growth slowed in Q1, the GDP Price Index component, which measures goods inflation, rose much higher than previously. As a result of the data the US Dollar strengthened in most pairs and AUD/USD pared its earlier gains, falling to a low 0.6486 after the release. 

Australian factory price inflation data out overnight, however, gave fresh impetus to the pair, after it showed a rise 4.3% YoY in Q1 from 4.1% in the previous quarter. The Producer Price Index (PPI) data added further evidence of price pressures in the Australian economy after Q1 CPI data beat expectations on Thursday giving a lift to AUD/USD in the process. 

Persistent inflation means the Reserve Bank of Australia (RBA) is seen as the last G10 bank likely to cut interest rates, with some analysts now delaying calls for an RBA rate cut until February 2025. The expectation that Aussie interest rates will fall more slowly than in other countries is supportive for the AUD as relatively higher interest rates attract greater capital inflows.