AUD/USD Regains Ground Ahead of FOMC Decision
- The AUD/USD pair climbs to a nearly two-week high of 0.6755.
- US Dollar consolidates losses, while concerns about Chinese data weigh on the AUD.
- Hawkish RBA stance supports the Australian Dollar.
In Tuesday’s trading session, the Australian Dollar has managed to regain ground against the US Dollar, reaching a two-week high of 0.6755. This upward momentum can be attributed to the USD consolidating its recent losses and worries surrounding economic data from China. Additionally, a positive risk sentiment in the market has further boosted the AUD/USD pair’s gains.
Amid conflicting economic signals and the Reserve Bank of Australia’s (RBA) firm stance on inflation, the expectations for interest rate cuts have been tempered. Analysts now anticipate only a modest 25-basis-point reduction by 2024, reflecting a more cautious outlook on the Australian economy.
On the US front, Retail Sales data released for August surpassed expectations, with the market now turning its focus to the upcoming Federal Reserve (FOMC) decision on Wednesday.
Daily Digest Market Movers: Australian Dollar Steady Ahead of Fed
- US Dollar consolidates recent losses amid expectations of a 50 basis points rate cut by the Fed.
- RBA’s hawkish outlook bolsters the risk-sensitive Australian Dollar.
- Fundamental backdrop favors the AUD, with concerns about China’s economic slowdown posing a potential headwind.
- Soft Retail Sales data from the US had minimal impact as market attention remains on the Fed’s interest rate decision.
- Analysts expect a 25 bps rate cut from the Fed, but a 50 bps cut is deemed more likely according to the CME FedWatch Tool.
- A smaller rate cut could strengthen the USD and weaken the AUD.
- A dovish Fed stance may benefit the AUD, while a hawkish stance could bolster the USD.
AUD/USD Technical Outlook: Pair Extends Gains
The AUD/USD pair has continued its upward trajectory for the second consecutive day, marking a week-long uptrend. With the Australian Dollar hovering above the mid-0.6700s, indicators suggest a positive outlook, especially if the pair maintains its position above the 20-day Simple Moving Average (SMA).
Fed FAQs
- The Federal Reserve (Fed) influences US monetary policy through interest rate adjustments.
- The Fed’s primary goals are to achieve price stability and full employment.
- FOMC meetings determine monetary policy decisions based on economic conditions.
- Quantitative Easing (QE) is a non-standard policy used during crises to increase credit flow.
- Quantitative Tightening (QT) is the reverse process of QE and can strengthen the US Dollar.