AUD/USD Surges to Near 0.6840 After Fed Announcement
The AUD/USD pair has reached a fresh eight-month high near 0.6840 during Thursday’s European session. This surge comes as a result of the US Dollar (USD) weakening following the Federal Reserve’s (Fed) recent monetary policy announcement.
Fed Cuts Key Borrowing Rates by 50 bps
- The Fed made its first interest rate cut in over four years, reducing borrowing rates by 50 basis points (bps) to 4.75%-5.00%.
- Market expectations were divided on the size of the interest rate cut, with some anticipating a shift towards policy normalization.
Market Reaction
- Historically, dovish interest rate decisions from the Fed lead to increased foreign flows to emerging markets and risk-perceived currencies.
- Following the interest rate cut, market sentiment has been positive, with S&P 500 futures experiencing significant gains.
- The US Dollar Index (DXY) has retreated from its weekly high, falling back to near 100.60.
Future Rate Expectations
- Policymakers predict the federal fund rate to reach 4.4% by year-end, suggesting another 50-bps decline in borrowing rates.
- However, the CME FedWatch tool indicates a possible 75-bps cut in future monetary policies this year.
Australian Employment Data Strengthens AUD
Positive Australian Employment data for August has further bolstered the Australian Dollar (AUD). The report revealed that Australian employers added 47.5K new workers, surpassing estimates of 25K.
Australian Dollar Price Today
The table below displays the percentage change of the Australian Dollar (AUD) against major currencies on the current day. Notably, the AUD was strongest against the Japanese Yen.
Analysis
The recent developments in the global financial markets, particularly the Fed’s interest rate cut and the positive Australian Employment data, have had significant impacts on the AUD/USD pair and other major currencies.
- The Fed’s decision to lower borrowing rates has led to a weaker USD, benefiting riskier assets like the AUD.
- Positive economic indicators from Australia, such as strong employment data, have further supported the AUD’s strength.
- Investors should closely monitor future Fed actions and economic data releases, as they can influence currency movements and investment decisions.
By staying informed and understanding the implications of such events on the financial markets, individuals can make more informed decisions regarding their investments and financial future.