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27/08/24
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Australian Dollar Stabilizes as RBA Maintains Hawkish Stance Amid Fed Rate Cut Speculations
The Australian Dollar (AUD) is currently stabilizing against the US Dollar (USD), maintaining a position just beneath a seven-month peak of 0.6798 reached recently. There is a general expectation among traders that the Reserve Bank of Australia (RBA) will adopt a more aggressive approach to monetary policy, potentially limiting the downside for the AUD/USD pair.
Recent insights from the RBA’s minutes indicate a consensus among board members that a rate cut in the near future seems unlikely. RBA Governor Michele Bullock reinforced this sentiment, stating the central bank remains ready to increase interest rates again to tackle inflation if necessary. This hawkish outlook contrasts sharply with the US Federal Reserve’s situation, where indications suggest potential interest rate cuts may be forthcoming.
Federal Reserve Chair Jerome Powell hinted at the need for a policy adjustment, although he did not provide specifics on the timing or extent of potential cuts. Current market sentiment anticipates a minimum reduction of 25 basis points at the Fed’s meeting in September, according to analysis based on the CME FedWatch Tool. There are also suggestions from some regional Fed presidents that a gradual easing of monetary policy could soon begin, contingent on inflation and labor market conditions.
In economic activity, US Durable Goods Orders have shown a strong rebound, rising 9.9% month-over-month in July. This contrasts with a decline in June and significantly exceeds expectations. Meanwhile, the US Composite PMI experienced a slight decrease yet remained above the critical growth threshold, indicating continued expansion in business activities.
In Australia, the Judo Bank Composite PMI registered a notable increase, reflecting an uptick in services even as manufacturing faced challenges. Most RBA board members have conveyed that they leaned towards holding rates steady this month, further implying that a drastic change in the near term is not on the horizon.
Technically, the AUD/USD is navigating around the 0.6770 level. Recent trends show a breach below the ascending channel, hinting at a potential weakening bullish momentum, though support remains evident at the nine-day Exponential Moving Average near 0.6726.
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