The Australian Dollar (AUD) dropped to fresh July lows against the US Dollar (USD), hovering near the 0.6450 mark, as a combination of disappointing domestic data and robust US economic figures drove traders toward the greenback. Early on, Australia’s Q2 2025 Consumer Price Index (CPI) rose by 0.7% quarter-over-quarter, below both the previous quarter’s 0.9% and the 0.8% forecast. This softer-than-expected inflation print raised concerns about slowing price pressures in the Australian economy.

In addition, the Reserve Bank of Australia’s (RBA) preferred inflation measure, the Trimmed Mean CPI, climbed just 0.6% quarterly and 2.7% year-over-year. While the annual figure met expectations, the quarterly figure fell short of the anticipated 0.7%. Meanwhile, June’s monthly CPI showed a 1.9% rise, down from 2.1% in May. This collective data increased market speculation that the RBA may adopt a more dovish stance in the coming months.

On the other side of the globe, the US Dollar surged after the release of upbeat macroeconomic data. The ADP report revealed that the US private sector added 104K jobs in July, surpassing the expected 78K. More impressively, Q2 GDP was reported at a 3% annual growth rate, far exceeding the 2.4% forecast and rebounding sharply from the -0.5% contraction in Q1. Additionally, the core PCE Price Index cooled to 2.5% from 3.5%, reflecting progress on the inflation front.

All eyes now turn to the Federal Reserve, which is expected to hold rates steady. However, focus will be on Chair Jerome Powell’s comments regarding future rate cuts, especially in light of strong economic performance. Political pressure is also rising, with President Trump urging immediate rate cuts on social media, citing low inflation and strong GDP.

Trade Idea:

Consider shorting AUD/USD toward 0.6400, with stops above 0.6520, as US strength and RBA softness diverge.