AUD/USD extends its upside to 0.6620 after US PPI report, US Inflation in focus

• AUD/USD moves higher to 0.6620 amid cheerful market mood and a decline in the US Dollar.
• Stubborn US PPI data fails to boost the US Dollar’s appeal.
• Economists expect that Australia’s Wage Price Index grew steadily in Q1 of this year.

The AUD/USD pair rises further to 0.6620 in Tuesday’s New York session. The Aussie asset strengthens as the US Dollar comes under pressure even though the United States Producer Price Index (PPI) report for April has turned out slightly hot. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to near the crucial support of 105.00.

Annual headline, and the core PPI data that strips off volatile food and energy prices grew in line with estimates of 2.2% and 2.4%. Monthly headline and core PPI rose strongly by 0.5%, beat the consensus and prior readings. Higher prices by business owners are majorly the outcome of rising input prices or robust household spending or a mix of both.

A large uptick in the producer inflation exhibits signs of persistent price pressures, which could negatively influence speculation for rate cuts by the Federal Reserve (Fed), for which financial markets expect that the September meeting will be the earliest point.

Meanwhile, the market sentiment is positive as investors shrugged off uncertainty of the US Consumer Price Index (CPI) data for April, releasing on Wednesday. The S&P 500 opens on a slightly bullish note. The US inflation data has remained hotter-than-expected in the first quarter of this year. A similar set of numbers would dent Fed rate-cut prospects for the entire year.

On the Australian Dollar front, investors await the Q1 Wage Price Index data, which will be published on Wednesday. Quarterly and annual wage inflation data is forecasted to have grown steadily by 0.9% and 4.2%, respectively. Persistent wage growth data would flare up upside risks to inflation, which would force the Reserve Bank of Australia (RBA) to maintain a restrictive interest rate framework for a longer period.