• AUD/USD prints gains on Friday after US Producer Price Index (PPI) data showed inflation easing.
• The US Core PPI rose by 0.2% MoM as expected, while annual PPI declined to 1.8%, increasing the likelihood of a Fed rate cut.
• Swaps markets show a 95.6% chance of a 25 bps Fed rate cut in November, up from 83.3%.

The Australian Dollar recovered some ground against the Greenback on Friday after a measure of prices paid by producers reaffirmed that inflation is coming down, warranting further easing by the Federal Reserve. The AUD/USD trades at 0.6748, registering modest gains of over 0.12%, though it is set to post weekly losses of over 0.60%.

AUD/USD climbs as US PPI data reinforces expectations for a 25 bps Fed rate cut in November

Data from the US Bureau of Labor Statistics (BLS) showed that the Producer Price Index (PPI) for September was 0% unchanged, below August’s 0.2% Month-on-Month increase. Excluding volatile items, the so-called Core PPI expanded by 0.2% Month-on-Month as expected, down from 0.3% a prior month.

On an annual basis, PPI increased by 1.8%, down from 1.9%, while underlying prices rose by 2.8%, up from 2.6%, and missed the 2.7% mark. Today’s data and yesterday’s CPI report hint that the Fed could cut rates at the November meeting.

The swaps markets show the Fed’s odds for a 25 bps rate cut at 95.6%, substantially up from 83.3% a day ago, when traders trimmed their positions on hawkish remarks by Atlanta’s Fed Raphael Bostic, who said he is open to cut or hold rates at the upcoming two meetings.

In other data, the University of Michigan (UoM) revealed that Consumer Sentiment deteriorated slightly from 70.1 to 68.9 and missed the consensus. Americans turned pessimistic due to higher living costs, while they upward revised inflation expectations from 2.7% to 2.9% over one year.

Chicago Fed President Austan Goolsbee crossed the wires on Bloomberg, praising the progress on inflation and the labor market. He added that despite the goodish September jobs report, there are no signs of overheating.