Breaking News: AUD/USD Hits Two-Week High Amidst Fed Rate Cut Bets

  • The AUD/USD pair attracts follow-through buyers, climbing to a nearly two-week high.
  • Bets on a 50 bps Fed rate cut and positive risk tone weaken the USD, supporting the AUD/USD pair.
  • Traders eye US Retail Sales data ahead of the Fed meeting for market direction.

Market Overview

The AUD/USD pair has seen a second consecutive day of gains, reaching a one-and-a-half-week high during the early European session. Currently trading above the mid-0.6700s, the pair is up around 0.15% for the day, as investors await the outcome of the upcoming Federal Open Market Committee (FOMC) meeting on Wednesday for further guidance.

Factors Driving the Market

The USD is facing pressure due to expectations of a 50 basis points interest rate cut by the Federal Reserve (Fed), leading to its lowest level since July 2023. Additionally, the Reserve Bank of Australia’s (RBA) hawkish outlook and positive sentiment in equity markets are supporting the Aussie, consequently boosting the AUD/USD pair.

The recent rally in spot prices, climbing nearly 150 pips from the 200-day Simple Moving Average (SMA) support, signals a shift in favor of USD bears. However, concerns about economic slowdown in China could pose a challenge for the Australian Dollar, given the country’s close ties to Chinese economic performance.

Key Events to Watch

Traders are awaiting the release of US monthly Retail Sales figures, which, along with US bond yields and overall market sentiment, will influence USD demand and provide direction for the currency pair. While the market response to the economic data may be limited, all eyes remain on the impending Fed policy decision.

Economic Indicator: Industrial Production (YoY)

Industrial output data from China’s National Bureau of Statistics reflects the volume of production in Chinese industries, including factories and manufacturing facilities. High industrial production growth could signal inflationary pressures, potentially leading to policy adjustments by the People’s Bank of China. A strong output reading may generate a positive sentiment for the CNY, while a low figure could have a bearish impact on the currency.

National Bureau of Statistics of China
People’s Bank of China

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Analysis and Implications

The AUD/USD pair’s recent surge is driven by a combination of factors, including Fed rate cut expectations, RBA’s stance, and global market sentiment. The upcoming Fed meeting and US economic data will play a crucial role in shaping the pair’s future direction.

For investors, staying informed about central bank decisions, economic indicators, and market sentiment is essential for making informed financial decisions. The AUD/USD pair’s movements provide valuable insights into the broader market dynamics and can impact investment strategies and portfolio management.

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