The Australian Dollar could appreciate due to expectations of the RBA’s maintaining higher rates.
The upside of the AUD could be limited as softer Q2 inflation diminished the odds of another RBA rate hike.
CME FedWatch tool suggests 72.0% odds of a 50-basis point Fed rate cut in September, up from 11.8% last week.
The Australian Dollar (AUD) moves sideways against the US Dollar (USD) with a positive bias on Thursday. This AUD/USD pair may appreciate due to the Reserve Bank of Australia's (RBA) hawkish hold of the cash rate at 4.35% on Tuesday. Furthermore, RBA Governor Michele Bullock has indicated that inflation is still too high, and a rate cut is not anticipated in the near future.
However, Australia’s recent inflation figures for the second quarter have reduced the expectations for another RBA rate hike, which could put a cap on the upside of the Australian Dollar. Markets are now projecting an RBA rate cut in November, a shift from the earlier forecast for April of next year.
The US Federal Reserve (Fed) is widely anticipated to implement a more aggressive rate cut beginning in September, following weaker employment data from July that has heightened concerns about a potential US recession.
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