AUD/USD drops on RBA’s dovish minutes and a buoyant greenback

The Australian dollar is erasing Monday’s gains during the North American session due to a risk-off impulse, a strong US dollar ahead of the Fed’s 75 bps rate hike, and also on the back of dovish minutes released by the Reserve Bank of Australia (RBA) of their September meeting.

The AUD/USD retraces from weekly highs hit around 0.6747 but is diving below the 0.6700 psychological figure for reasons mentioned above. At the time of writing, the AUD/USD is trading at 0.6683, below its opening price.

AUD/USD drops on RBA’s discussion of hiking 25 or 50

Earlier in the North American session, data from the US Department of Commerce showed that Housing Starts for August unexpectedly rose, above estimates. Contrarily US Building Permits slowed to their slowest pace in two years, flashing signs of higher mortgage rates, influenced by the US Federal Reserve’s current tightening cycle.

In the meantime, the US Dollar Index, a gauge of the buck’s value vs. a basket of currencies, is rising 0.42%, up at 110.052, while the US 10-year bond yield edges up eight bps, at 3.573%, a headwind for the EUR/USD.

During the Asian session, September RBA minutes emphasized that monetary policy is not on a “pre-set path and would be balanced to try and keep the economy on an even keel.” According to the minutes, most RBA members are seeing the case for a slower pace of increases is becoming “stronger as the level of cash rate rises.”

Westpac analysts expect the RBA to hike 50 bps in October, followed by 25 bps in November, December, and February, lifting rates to 3.6%.

What to watch

The Aussie economic docket would feature a speech for RBA member Bullock. In the US economic calendar, US Existing Home Sales, the Fed’s decision, and Jerome Powell’s press conference would shed some light regarding the path of the US central bank.

AUD/USD Key Technical Levels