AUD/USD Drops Below 0.6600 After Fed's Cautious Tone
The AUD/USD pair weakened to the 0.6585 area early in the Asian session, breaking below 0.6600. This weakening occurred after Fed Chair Jerome Powell reiterated the need to consider the risks of persistently high inflation and a weakening labor market—signaling that the central bank is in no rush to cut interest rates aggressively. This tone slightly strengthened the US dollar and pressured the Aussie.
Elsewhere, Mary Daly (San Francisco Fed) said further interest rate cuts were likely necessary, but with a cautious approach. Conversely, Austin Goolsbee (Chicago Fed) warned against a rapid series of cuts. These mixed statements dampened expectations of aggressive easing at the October meeting.
In Australia, monthly CPI inflation data for August rose 3.0% (y/y)—the fastest pace in a year. This less-than-encouraging figure prompted the market to reduce expectations of rapid easing by the RBA, providing limited support for the AUD amid a stronger USD.
Australian Bureau of Statistics
Looking ahead, market participants await the final release of US second-quarter GDP on Thursday for additional clues regarding the Fed's policy direction. As long as 0.6600 remains the immediate resistance level, downside risks for AUD/USD remain; sentiment could shift if US data weakens or RBA expectations become more hawkish.
Key Points:
AUD/USD weakened to around 0.6585 in early Asia, below 0.6600.
Powell remains cautious; there is no urgency for aggressive rate cuts.
Daly: Further cuts may be needed; Goolsbee: Avoid a rapid series of cuts.
Australia's August CPI was 3.0% year-on-year, reducing the likelihood of RBA easing anytime soon. (advertisement)
Source: FXstreet
