The Australian dollar rose in European trade on Wednesday against a basket of major rivals, extending gains for the third straight session against the US dollar and hitting a two-month high amid mounting risk appetite.

Such considerations overshadowed earlier data that showed Australian wages slowed down in the first quarter of the year, in turn reducing pressures on the Reserve Bank of Australia and boosting the odds of a rate cut this year.

The Price

The AUD/USD pair rose 0.4% to 0.6651 today, the highest since March 8, with a session-low at 0.6622.

The pair rose 0.3% yesterday, the second profit in a row as most major currencies advance on the US dollar.

Positive Sentiment

Markets are dominated by a wave of positive sentiment as US long-term treasury yields tumbled following producer prices data.

Even as US producer prices rose past estimates last month, the surprise was in the revisions to the March reading.

US Producer Prices

US producer prices rose 0.5% m/m in April, passing estimates of 0.3%, however, Marchs reading was revised to show a contraction of 0.1% instead of a 0.2% increase.

Core producer prices rose 0.5% m/m in April, above estimates of 0.2%, with the March reading revised to show a 0.1% decline.

On a yearly basis, US producer prices rose 2.2% in April, with the March reading reduced to show a 1.8% increase.

US Rates

Following the data, the odds of a Fed interest rate cut in July rose to 30%, and the odds of such a cut in September rose to 70%.

According to the Fedwatch tool, investors are expecting two interest rate cuts overall by the Federal Reserve this year.

Australian Wages

Earlier Sydney data showed quarterly wages rose by 0.8% in the first quarter, below estimates of 0.9%.

Such data reduces inflationary pressures on the RBA and paves the way for a likely interest rate cut this year.