The Australian dollar just posted its largest gain in months

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  • The Australian dollar jumped on Thursday, rallying hard against the greenback and all major crosses.
  • A soft US inflation report for April was the main catalyst behind the move.
  • There’s very little major economic data scheduled for release on Friday.

The Australian dollar jumped on Thursday, rallying hard against the greenback and all major crosses.

Here’s the scoreboard as at 7am AEST.

AUD/USD 0.7533 , 0.0071 , 0.95%
AUD/JPY 82.4 , 0.51 , 0.62%
AUD/CNH 4.7671 , 0.0183 , 0.39%
AUD/EUR 0.6321 , 0.0024 , 0.38%
AUD/GBP 0.5573 , 0.0066 , 1.20%
AUD/NZD 1.0816 , 0.0139 , 1.30%
AUD/CAD 0.9612 , 0.0029 , 0.30%

The Aussie was supported by a soft US inflation report for April, helping to diminish concerns that price pressures may prompt the US Federal Reserve to lift interest rates faster and higher than markets currently expect.

“[The] USD fell against most major currencies overnight and US-10 year Treasury yields dropped back under 3.00% because of softer US inflation,” said Elias Haddad, Senior Currency Strategist at the Commonwealth Bank.

“US core CPI inflation rose by just 0.1% in April to be up 2.1% over the year.”

Markets had been expecting an increase of 0.2% for the month, leaving the gain over the year at 2.2%.

While a slight undershoot, Greg McKenna, Chief Market Strategist at AxiTrader, said it was enough for traders to take profit in the US dollar after a solid run in recent weeks.

“What’s really going on is the USD is a little extended and ripe for a reversal,” he said.

“Inflation did not accelerate faster-than-expected, but it is on the Fed’s track. And that means it is also on track for two, maybe three, more hikes this year.”

The inflation report certainly helped the AUD/USD, seeing it jump to as high as .7540 during the session. It finished with a gain of over 0.9%, the largest increase since March 21.

AUD/USD Hourly Chart

The Aussie also rallied hard against the New Zealand dollar and UK pound following dovish forecasts and commentary offered by the RBNZ and BoE during the session.

Turning to the day ahead, there’s very little on the economic calendar to interest traders, pointing to the likelihood that sentiment and technicals will dictate direction.

Australian home loan data for March will be released at 11.30am AEST. Chinese monetary growth statistics for April are also scheduled to arrive at some point during the session.

Later in the day, highlights include Canadian unemployment data along with trade prices and University of Michigan consumer sentiment survey in the United States.

James Bullard of the US Fed and ECB President Mario Draghi are also expected to deliver speeches.