The Australian Dollar declines despite a risk-on sentiment following the dovish Fed Chair Powell.
The downside of the AUD may be restrained due to the hawkish mood surrounding the RBA.
The US Dollar loses ground due to rising expectations of a 25 basis points rate cut in September.
The Australian Dollar (AUD) edges lower, still hovering around a seven-month high of 0.6798 on Monday. However, the AUD/USD pair gained ground due to the rising risk-on sentiment following the dovish speech from the US Federal Reserve (Fed) Chairman Jerome Powell at the Jackson Hole Symposium on Friday.
The Aussie Dollar also received support from the hawkish sentiment surrounding the Reserve Bank of Australia (RBA) regarding its policy outlook. the recent RBA Minutes showed that the board members agreed that a rate cut is unlikely soon. Additionally, RBA Governor Michele Bullock expressed that the Australian central bank will not hesitate to raise rates again to combat inflation if needed.
The US Dollar (USD) depreciates due to rising odds of a rate cut in September. According to the CME FedWatch Tool, markets are now fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting.
Fed Chair Jerome Powell stated at the Jackson Hole Symposium "The time has come for policy to adjust." However, Powell did not specify when rate cuts would begin or their potential size.
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