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12/09/24
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RBA’s Fraser Sparks AUD/USD Uptick Amid Inflation and Employment Concerns
The AUD/USD currency pair has shown a slight uptick following critical comments from former Reserve Bank of Australia (RBA) Governor Bernie Fraser. He expressed concerns that the RBA’s current board is concentrating too heavily on controlling inflation, inadvertently neglecting the job market’s stability. Recent data revealed that Australia’s Consumer Inflation Expectations fell to 4.4% in September, down from August’s four-month high of 4.5%. Fraser suggested a reduction in the cash rate to mitigate potential recessionary risks that could adversely affect employment.
The Australian Dollar is benefiting against the US Dollar as market sentiment improved after the release of recent US inflation data. The Consumer Price Index (CPI) for August showed headline inflation hitting a three-year low, even as core inflation remained higher than anticipated. This shift has increased expectations for the Federal Reserve to initiate an easing cycle, with market participants predicting a 25-basis point interest rate cut in their upcoming September meeting.
In commentary from within the RBA, concerns were raised about high interest rates dampening consumer demand, which could lead to a mild economic slowdown. However, the labor market remains relatively tight, with employment growth anticipated to continue, albeit at a slower pace than population growth.
Current projections point toward a strong expectation of at least a 25 basis point rate cut from the Federal Reserve, with the probability of a more significant 50 basis point cut diminishing significantly over the past week. Additionally, the Australian Consumer Inflation Expectations findings reflect the central bank’s cautious balancing act in trying to lower inflation while also prioritizing job growth.
The latest data indicates that the AUD/USD pair is trading around 0.6680, with technical indicators suggesting a bearish trend within a descending channel pattern. If this downward movement continues, the pair could potentially target levels around 0.6600, while a break above the resistance found at 0.6694 might change the current bearish outlook and pave the way toward higher levels.
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