|

AUD/USD rises as RBA flags inflation risks, Fed dovishness weighs on USD

  • The Australian Dollar strengthens following cautious remarks from the RBA on inflation.
  • Australia’s labor market may show a slight slowdown, with the Unemployment Rate expected to increase to 4.3% in September.
  • Dovish expectations surrounding the Federal Reserve continue to weigh on the US Dollar.

AUD/USD advances by 0.40% to trade around 0.6510 on Wednesday at the time of writing. The Australian Dollar (AUD) gains ground after Sarah Hunter, Assistant Governor of the Reserve Bank of Australia (RBA), warned on Wednesday that inflation risks in the economy remain tilted to the upside. Speaking at the Citi Australia & New Zealand Investment Conference in Sydney, she said that “inflation is likely to be stronger than expected in the third quarter, while labor market and economic conditions might be tighter than assumed.”

Her remarks reinforced the idea that the RBA is unlikely to embark on an aggressive rate-cutting cycle in the near term. Investors are now waiting for the release of the third-quarter Consumer Price Index (CPI) report, due later in October, for further guidance on inflation dynamics.

Meanwhile, market attention turns to the September employment data, due on Thursday. Consensus expects a 17,000 increase in employment after a 5,400 drop in August, with the Unemployment Rate edging higher to 4.3% from 4.2%. According to ING, such a move is unlikely to concern the central bank unless a sharper deterioration in job conditions emerges.

On the global front, persistent trade tensions between the United States (US) and China remain a downside factor for the Australian Dollar, given Australia’s heavy reliance on Chinese demand.

The US Dollar (USD) remains under pressure, weakened by firm expectations of monetary easing by the Federal Reserve (Fed). According to the CME FedWatch tool, markets are pricing in a 95.6% chance of two rate cuts totaling 50 basis points before year-end, which would bring the target range down to 3.50%–3.75%.

Recent remarks from Fed Chair Jerome Powell strengthened this view. He emphasized that the deterioration in the labor market is now a bigger concern than inflationary pressures, suggesting that further rate cuts could come as early as the October meeting. In a similar tone, Fed Governor Michelle Bowman said she continues to expect “two more rate cuts before the end of this year.”

This dovish outlook, combined with a recovery in global risk appetite, is weighing on the US Dollar and supporting the Australian Dollar’s rebound. In the short term, the AUD/USD pair’s direction will depend largely on the upcoming Australian employment data and the evolution of trade tensions between Washington and Beijing.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.14%-0.31%-0.24%0.00%-0.41%0.10%-0.27%
EUR0.14%-0.12%-0.14%0.12%-0.24%0.18%-0.13%
GBP0.31%0.12%0.00%0.28%-0.11%0.30%0.04%
JPY0.24%0.14%0.00%0.23%-0.16%0.18%0.07%
CAD-0.00%-0.12%-0.28%-0.23%-0.42%0.02%-0.24%
AUD0.41%0.24%0.11%0.16%0.42%0.41%0.15%
NZD-0.10%-0.18%-0.30%-0.18%-0.02%-0.41%-0.26%
CHF0.27%0.13%-0.04%-0.07%0.24%-0.15%0.26%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

More from Ghiles Guezout
Share:

Editor's Picks

EUR/USD holds losses below 1.1850 ahead of FOMC Minutes

EUR/USD stays on the back foot below 1.1850 in the European session on Wednesday, pressured by renewed US Dollar demand and reports that ECB President Lagarde will step down before the end of her term. Traders now look forward to the Minutes of the Fed's January monetary policy meeting for fresh signals on future rate cuts. 

GBP/USD defends 1.3550 after UK inflation data

GBP/USD is holding above 1.3550 in Wednesday's European morning, little changed following the UK Consumer Price Index (CPI) data release. The UK inflation eased as expected in January, reaffirming bets for a March BoE interest rate cut, especially after Tuesday's weak employment report. 

Gold retains bullish bias amid Fed rate cut bets, ahead of Fed Minutes

Gold sticks to modest intraday gains through the early European session, reversing a major part of the previous day's heavy losses of more than 2%, to the $4,843-4,842 region or a nearly two-week low. That said, the fundamental backdrop warrants caution for bulls ahead of the FOMC Minutes, which will look for more cues about the US Federal Reserve's rate-cut path. 

Pi Network rally defies market pressure ahead of its first anniversary

Pi Network is trading above $0.1900 at press time on Wednesday, extending the weekly gains by nearly 8% so far. The steady recovery is supported by a short-term pause in mainnet migration, which reduces pressure on the PI token supply for Centralized Exchanges. The technical outlook focuses on the $0.1919 resistance as bullish momentum increases.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Top 3 Price Prediction: Bitcoin, Ethereum, and Ripple face downside risk as bears regain control

Bitcoin, Ethereum, and Ripple remain under pressure on Wednesday, with the broader trend still sideways. BTC is edging below $68,000, nearing the lower consolidating boundary, while ETH and XRP also declined slightly, approaching their key supports.