The Australian Dollar appreciates due to a slight increase in the odds of a 50 basis points Fed rate cut.
The Aussie Dollar receives support from the RBA’s hawkish stance.
The US Dollar faces challenges as the Treasury yields decline amid uncertainty over the scale of the Fed rate cut.
The Australian Dollar (AUD) inches higher against the US Dollar (USD) on Monday. The AUD/USD pair may appreciate further due to growing speculation that the US Federal Reserve will opt for a jumbo 50 basis points rate cut at this week’s monetary policy meeting. Traders look forward to a slew of Australian jobs data due later this week to gauge the health of the labor market and the potential implications on domestic monetary policy.
The Reserve Bank of Australia (RBA) has maintained a hawkish stance, with RBA Governor Michele Bullock stating that it is premature to consider rate cuts due to persistently high inflation. RBA Assistant Governor Sarah Hunter also noted that while the labor market remains tight, wage growth appears to have peaked and is expected to slow further.
The US Dollar receives downward pressure as US Treasury yields depreciate amid uncertainty over the scale of the Fed rate cut. According to the CME FedWatch Tool, markets anticipate 48.0% odds of a 25 basis point (bps) rate cut by the Fed at its September meeting. The likelihood of a 50 bps rate cut has increased to 52.0%, up from 50.0% a day ago.
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