AUD/USD reverses from weekly top, drops toward 0.6400

AUD/USD trades lower around 0.6410 during the Asian session on Friday, reversing from the weekly top. The pair experiences downward pressure due to upbeat United States (US) economic data overall, elevated US Treasury yields, and mixed sentiment around monetary policy tightening by the US Federal Reserve in the September meeting. Additionally, fading US-China optimism coupled with China’s economic challenges exert pressure on the Australian Dollar (AUD) as a result of the intricate export-trade ties between the two nations.

US Initial Jobless Claims suggested positive employment conditions, which have led to concerns about the inflation outlook in the US. For the week ending on August 18, the index fell to 230K lower than the expectations of remaining consistent as reported 240K prior. However, US Durable Goods Orders for July reported a reduction of 5.2% as compared to the market consensus of 4%, declining from the 4.4% reading in June.

The AUD/USD pair is weakening due to the mixed sentiments over more interest rate hikes by the US Fed, following Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium on Friday. Additionally, former St. Louis Federal Reserve President James Bullard made hawkish remarks, underpinning the US Dollar (USD). Bullard said “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon” – Bloomberg. Conversely, Federal Reserve Bank of Philadelphia President Patrick Harker hinted at an end of the rate hike trajectory whereas the President of the Boston Federal Reserve defended maintaining a bias towards keeping rates at higher levels for an extended duration.

The US Dollar Index (DXY), which measures the performance of the Greenback against six major currencies, is continuing to extend gains as Fed Chair Powell’s speech looms. The spot price trades higher around 104.30 at the time of writing. Traders will closely monitor the central banks’ speeches, seeking insights into economic conditions and inflation outlook, which will influence the Fed’s decision on upcoming monetary policy.