Australian Dollar weakens as PBOC holds rates, US Dollar gains ahead of FOMC Minutes

The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Wednesday, extending its losses for the third consecutive session. The AUD/USD pair remains subdued after the People’s Bank of China (PBOC) announced to leave its one- and five-year Loan Prime Rates (LPRs) unchanged at 3.00% and 3.50%, respectively.

US Treasury Secretary Scott Bessent said late Monday that the talks between the United States (US) and China are going well, adding that he expects US growth to pick up in the fourth quarter (Q4). Bessent further noted that the current arrangement with China is highly effective, as the country remains the largest contributor to tariff revenue.

The AUD/USD pair also struggles as the US Dollar (USD) extends its gains amid geopolitical developments. White House press secretary Karoline Leavitt announced on Tuesday that plans for a bilateral meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy are now underway, according to CNN.

Australian Dollar declines as US Dollar strengthens on Ukraine-Russia peace hopes

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is gaining ground for the third successive day and trading around 98.30 at the time of writing. The US Federal Reserve’s Minutes for the July meeting will be eyed later in the North American session. Traders will shift their focus toward the Jackson Hole Economic Policy Symposium due on Thursday, with Fed Chair Jerome Powell’s speech for guidance on a September policy decision.
• US President Donald Trump said on Tuesday that there won’t be American troops on the ground to help enforce a potential peace deal in Ukraine. The terms of security guarantees are still being negotiated between the US, European partners, and Ukraine.
• Ukraine’s President Volodymyr Zelenskyy late Monday emphasized the need for genuine peace and welcomed US involvement in security guarantees. Zelenskyy also confirmed major US arms purchase plans. Furthermore, US Secretary of State Marco Rubio said on Tuesday that he would work with European allies and non-European countries on security guarantees for Ukraine.
• The Trump administration has broadened its 50% tariffs on steel and aluminum imports, taking effect on August 18. Friday’s notification has included 407 new product codes in the US Harmonized Tariff Schedule. US President Donald Trump also told reporters he intends to issue further announcements on steel tariffs, along with new levies aimed at semiconductor imports.
• Recent US economic data keeps intact the dovish tone surrounding the US Federal Reserve’s (Fed) policy outlook. CME’s FedWatch tool suggests that markets are pricing in 86.5% odds of a 25-basis-point Fed rate cut in September.
• Australia’s Westpac Consumer Confidence surged 5.7% in August to 98.5, following a 0.6% increase in July. The sentiment has reached a high since February 2022, as the Reserve Bank of Australia (RBA) has delivered rate cuts totaling 75 basis points since January. Matthew Hassan, Head of Australian Macro-Forecasting, said the prolonged period of consumer pessimism may be coming to an end, although maintaining momentum could require additional easing. However, he emphasized that policymakers are under no immediate pressure to deliver further cuts.
• The Reserve Bank of Australia (RBA) delivered a 25 basis points (bps) interest rate cut on Tuesday, as widely expected, bringing the Official Cash Rate (OCR) to 3.6% from 3.85% at the August policy meeting.

Australian Dollar bears target two-month lows near 0.6400

AUD/USD is trading around 0.6450 on Wednesday. The technical analysis on the daily chart indicates that short-term price momentum is weakening as the pair remains below the nine-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) is positioned below the 50 level, suggesting that market bias is bearish.

On the downside, the AUD/USD pair may explore the area around the two-month low of 0.6419, recorded on August 1, followed by the three-month low of 0.6372.

The AUD/USD pair may target the primary barrier at the nine-day EMA at 0.6486, followed by the 50-day EMA at 0.6497. A break above this crucial resistance zone could improve the short- and medium-term price momentum and support the pair to target the monthly high at 0.6568, reached on August 14, followed by the nine-month high of 0.6625, which was recorded on July 24.

AUD/USD: Daily Chart