AUD to USD Forecast: Aussie Wage Growth and the US CPI Report in the Spotlight

Australian Wage Growth and the RBA Rate Path

On Wednesday (May 15), Australian wage growth will impact buyer demand for the AUD/USD.

Economists forecast the Australian Wage Price Index to increase 4.2% year-on-year in Q1 2024 after advancing 4.2% in Q4 2023. Furthermore, economists expect the Index to rise by 0.9% quarter-on-quarter after a 0.9% increase in Q4.

Larger-than-expected wage growth could refuel speculation about an RBA interest rate hike. Higher wages may increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation. A more hawkish RBA rate path could raise borrowing costs and reduce disposable income.

In the recent RBA press conference, RBA Governor Michele Bullock highlighted uncertainty about household spending. Moreover, the RBA Governor poured cold water over discussions about raising interest rates. The wage growth figures could change the narrative.

Beyond the numbers, investors should monitor RBA chatter. Reactions to the Australian budget and the wage growth figures could move the dial.

However, the People’s Bank of China (PBoC) will also draw interest. The PBoC will announce the 1-year Medium-Term Lending Facility (MLF) Rate. Economists expect the PBoC to leave the 1-year MLF Rate at 2.5%. An unexpected cut in the MLF Rate could influence buyer appetite for the Aussie dollar.

US Economic Calendar: US CPI Report and the Fed

Later in the Wednesday session, the all-important US CPI Report will put the Fed in focus.

Economists forecast the annual rate of inflation to ease from 3.5% to 3.4% in April. Hotter-than-expected numbers could dampen investor expectations for a September Fed interest rate hike.

A more hawkish Fed rate path would raise borrowing costs and reduce disposable income. Downward trends in disposable income could force consumers to curb spending and dampen demand-driven inflation.

However, US retail sales figures will also garner investor interest. Better-than-expected numbers may also influence the Fed rate path. Economists forecast retail sales to increase by 0.4% in April after rising by 0.7% in March. Consumer spending trends influence demand-driven inflation and Fed monetary policy goals.

Other stats include the NY Empire State Manufacturing Index and housing sector data. However, these will likely play second fiddle to the CPI Report and retail sales numbers.

With inflation and retail sales in focus, investors should also monitor FOMC member chatter. FOMC members Neel Kashkari and Michelle Bowman are on the calendar to speak on Wednesday. Reactions to the CPI Report and views on the timing of a Fed interest rate cut could move the dial.

Short-Term Forecast

Near-term AUD/USD trends will likely hinge on the US CPI Report and Australian wage growth figures. Sticky US inflation numbers could impact bets on a September Fed rate cut and tilt monetary policy divergence toward the US dollar. Nevertheless, hotter-than-expected Aussie wage growth figures could fuel bets on an RBA rate hike.

AUD/USD Price Action

Daily Chart

The AUD/USD remained above the 50-day and 200-day EMAs, affirming the bullish price signals.

An Aussie dollar breakout from the $0.66500 handle could give the bulls a run at the $0.67003 resistance level. A break above the $0.67003 resistance level would support a move toward the $0.67500 handle.

Australian wage growth, the US CPI Report, US retail sales, and FOMC member commentary need consideration.

Conversely, an AUD/USD fall through the $0.65760 support level and the 200-day EMA could give the bears a run at the 50-day EMA. A break below the 50-day EMA could signal an Aussie dollar drop below $0.65.

With a 14-period Daily RSI reading of 59.00, the AUD/USD could visit the $0.67003 resistance level before entering overbought territory.