The Australian dollar is expected to come under pressure this week on the back of poor inflation numbers which many say will trigger a rate cut from the Reserve Bank of Australia.
An expected rate rise later in the year from the US Federal Reserve is also expected to weigh on the currency and will also reduce the attraction of a carry trade play between the US and Australian dollars.
“The AUD/USD will grind lower because of a recovery in the USD and if a weak Q2 underlying CPI lifts the pricing for a RBA rate cut next week,” said Jospeh Capurso, senior currency strategist at the Commonwealth bank.
“Weak growth in wages, low inflation expectations, and some spare capacity in the labour market is bearing down on inflation.” He added.
The market had also began to write off any chance of a rate hike by the US Fed, but that all changed over the last week as a raft of solid data from America was released,
"The pricing for a rate hike in September was about zero earlier this month, and now it's about a 25 per cent chance. The market is taking the prospect of the US rate hike seriously," noted Westpac senior currency strategist Sean Callow