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AUSTRALIAN DOLLAR ATTRACTS BUYERS DUE TO ODDS OF RBA MAINTAINING HAWKISH STANCE

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  • 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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