US dollar dips as inflation fears ebb. AUD/USD continues to recover


US dollar on the decline

Fears of an early Fed taper or rate hike faded after inflation data matched economist estimates in May. Core PCE rose 3.4%, as expected.

The recent trend in inflation numbers has been to exceed the consensus, particularly in the recent 5.0% CPI reading.

Markets were braced for more of the same but when that didn’t happen the dollar slid across the board. The commodity currencies took particular advantage and AUD/USD took particular advantage, rising to the highs of the week and further above the 200-day moving average and the March 31 low. A week ago, this pair looked like it could be headed for an ugly breakdown but it has quickly recovered.

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