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NK summit grabs headlines, but Aussie hit by US CPI ahead of Fed

The Australian dollar inched higher in yesterday’s trade as headlines from the US-NK summit in Singapore boosted sentiment but, overnight, a strong showing from US inflation brought the local currency back to earth.

Earlier, an agreeable meting between US President Donald Trump and North Korean leader Kim Jong-un, followed by a deal between the two countries, saw Asian sharemarkets mostly higher. The AUD was boosted.

However, a higher-than-excepted reading from US core inflation overnight, which climbed to 2.2% in annual terms in May, pushed the AUD lower as markets turned their attention to tomorrow morning’s all-important meeting of the US Federal Reserve.

The stronger inflation reading adds to the case for further US rate hikes.

Aussie lower

The AUDUSD was quickly sold on the US inflation numbers with the pair down 0.5% as it neared two-week lows.

The AUD fell versus all other major currencies.

The AUDEUR fell 0.1%, the AUDJPY dropped 0.2% and the AUDNZD lost 0.3%.

The Aussie saw large losses against the British pound after the UK government successfully passed a key Brexit bill through parliament.

The AUDGBP fell 0.5%.

Fed, jobs, ECB

The Aussie could see a volatile 36 hours with the US Federal Reserve, Australian jobs and the European Central Bank meeting all due.

The AUDUSD will likely be driven by the Fed’s forecasts with the market predicting a rate hike is almost certain. With inflation now above the Fed’s target, commentary around this issue will be critical.

Otherwise, Australian jobs tomorrow, and the ECB tomorrow night, means we could see significant moves over the next day-and-a-half.

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