• US inflation eases to 3.1%, core rate unchanged at 4.0%
• Australia consumer confidence rebounds, business confidence slides

The Australian dollar was up 0.35% prior to the US inflation release but has since reversed directions. In the North American session, AUD/USD is trading at 0.6550, down 0.29%.

US inflation ticks lower, core rate steady

US inflation edged lower to 3.1% y/y in November, down from 3.2% in October and in line with the consensus estimate. The reading was the lowest in five months, with energy and food costs declining. Monthly, CPI ticked up to 0.1%, up from 0.0% in October and above the consensus estimate of 0.0%. Core CPI remained unchanged at 4.0% y/y, matching the consensus estimate. Monthly, the core rate rose from 0.2% to 0.3%, matching the consensus estimate.

The inflation report, which was quite close to what was expected and showed very little change from October, could take some of the wind out of the market calls for four or five rate cuts next year. Inflation is falling slowly and is still well above the 2% target and today’s report shouldn’t change the Fed’s hawkish rate path of ‘higher for longer’.

Australian confidence data a mixed bag

Australia released consumer and business confidence data earlier today, with mixed results. The Westpac Consumer Confidence index rebounded in December with a 2.7% gain, after a nasty -2.6% reading in November. Still, the index remains deep in pessimistic territory, well below the 100 level which separates optimism from pessimism. Consumers remained deeply concerned about the cost of living crisis and the possibility that the central bank could raise interest rates. The Westpac report noted that the Reserve Bank of Australia’s decision to hold rates earlier this month lifted consumer sentiment.

The NAB Business Confidence index was dismal, sliding to -9 in November, after a revised -3 in October. Business confidence has fallen to its lowest level since 2012, except for the Covid period. Business conditions also eased in most industries.

Reserve Bank of Australia Governor Michele Bullock said on Tuesday that the RBA would continue to monitor data in determining its rate path and that the country was not falling behind the rest of the world in the fight against inflation. Bullock said that the central bank was aiming to slow the economy enough to reduce inflation to the target bank while preserving the employment gains achieved over the past few years.

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AUD/USD Technical

• AUD/USD tested support at 0.6555 earlier. Below, there is support at 0.6523
• 0.6585 and 0.6613 are the next resistance lines

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