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AUD Slips On Fears Over US Economy

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icon 05/08/24
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AUD Slips On Fears Over US Economy

On Monday, the Australian dollar dropped at the beginning of the trading week. AUD/USD fell as much as 2.5% in the Asian session and declined to the lowest levels since Nov. 2023. The Australian dollar has trimmed those losses and traded at about 0.6448, 0.96% lower for the day.

The Reserve Bank of Australia will meet on Tuesday and it’s virtually certain that the central bank will keep the cash rate at 4.35%. The RBA has not changed rates for 6 straight times and at recent meetings, policymakers have discussed hiking rates.

The RBA would however prefer to cut rates, which are at 12-year highs and are squeezing households and businesses. Inflation remains stubborn and it has moved the wrong way in Q2, rising to 3.8%from 3.6%.

This is much higher than the RBA’s upper band of its target range of 1% – 3% and it won’t be surprising if policymakers discuss hiking rates at tomorrow’s meeting again before keeping rates unchanged.

As the RBA is expected not to make a move, markets will be focusing on Governor Bullock’s press conference and the rate statement. It is expected the message from the RBA will be along the lines that inflation is still too high to cut interest rates.

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