During early European trading hours on Wednesday, the AUD/USD pair continued its upward trajectory near 0.6545, buoyed by a hawkish stance from the Reserve Bank of Australia (RBA). The RBA opted to maintain its interest rates at 4.35% for the sixth consecutive meeting in August, with Governor Michele Bullock emphasizing persistent inflation concerns and the potential need for prolonged higher interest rates to address them.
Investor focus now turns to RBA Governor Bullock’s upcoming speech on Thursday, expected to provide further insights into the central bank‘s monetary policy outlook. The RBA’s hawkish indications on interest rates are poised to bolster the Australian Dollar (AUD) in the near term.
Meanwhile, market attention also gravitates towards China’s upcoming economic data release by the National Bureau of Statistics, including the Consumer Price Index (CPI) and Producer Price Index (PPI) for July. Projections suggest CPI inflation may rise marginally to 0.3% from June’s 0.2%, while PPI could decline to 0.9% in the same period. Weaker-than-expected figures might heighten concerns of a slowdown in China, adversely impacting the AUD as China remains Australia’s largest trading partner.
On the USD front, traders are increasingly pricing in expectations of a more aggressive rate cut by the Federal Reserve (Fed). The CME FedWatch Tool indicates an approximately 85% probability of a 50 basis points (bps) rate cut in September, significantly elevated from just 11.5% last week. JPMorgan’s chief economist Michael Feroli underscored the urgency for pre-emptive action before the Fed’s scheduled policy meeting in mid-September. This growing anticipation of Fed rate cuts could weaken the US Dollar, providing tailwinds for further AUD/USD appreciation.
Overall, the AUD/USD pair remains under the influence of central bank policies and economic data releases, with potential volatility ahead based on market reactions to upcoming events and developments.
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