AUD/USD weakens toward 0.6500 as US Dollar gains despite soft PPI

• The Australian Dollar (AUD) extends its decline against the US Dollar (USD) for the fourth straight session.
• AUD/USD trades near 0.6500 during the American session, down over 1% on the week.
• The headline PPI came in flat for June, while Core PPI also missed expectations.

The Australian Dollar (AUD) extends its losing streak against the US Dollar (USD) for the fourth consecutive session on Wednesday, weighed down by renewed strength in the Greenback. The US Dollar is edging higher despite softer-than-expected US Producer Price Index (PPI) data, as traders remain cautious amid persistent inflation concerns and escalating tariff threats from the United States.

The AUD/USD pair is edging lower during the American trading hours. At the time of writing, the pair is trading near the key psychological support level of 0.6500, down over 1% so far this week. Meanwhile, the US Dollar Index (DXY), which measures the Greenback’s performance against a basket of six major currencies, refreshes its three-week high, holding around the 98.80 mark.

US PPI data released on Wednesday came in softer than expected, reinforcing signs of moderating inflation at the producer level. Headline PPI was flat on a monthly basis in June, missing forecasts of a 0.2% rise and slowing from the previous 0.3% increase. On an annual basis, PPI eased to 2.3% from 2.6% in May.

Meanwhile, Core PPI, which excludes food and energy, printed at 0.0% MoM versus 0.2% expected and slipped to 2.4% YoY from 2.6%.

Despite the weaker data, markets seemed to ignore the downside surprise, as traders stayed focused on the latest Consumer Price Index (CPI) report, which showed that inflation remains sticky. Cautious commentary from Federal Reserve officials has also kept expectations for an imminent rate cut in check. Combined with rising global trade tensions, these factors are helping support the US Dollar despite the softer PPI reading.

On the Australian side, weak economic data continues to put pressure on the Aussie. Consumer Confidence remains low, with the ANZ-Roy Morgan index falling deeper into negative territory in July. The economy grew by only 0.2% in the first quarter, showing signs of slowing down. At the same time, inflation has cooled and is now near the lower end of the Reserve Bank of Australia (RBA) 2-3% target. These signs have increased market expectations that the RBA could cut interest rates at its next meeting.

Looking ahead, all eyes will be on Australia’s jobs report and US Retail Sales data, both due on Thursday. The Australian employment figures could influence the Reserve Bank of Australia's next move, especially if the data signals further weakness in the labor market. Meanwhile, US Retail Sales will provide fresh insight into consumer spending. Strong numbers may further support the US Dollar, while weaker data could ease some of the upward pressure.