Aussie Dollar Weakens Against US Dollar
- The Australian dollar is losing value as the US dollar strengthens, despite the potential for a Federal Reserve rate cut.
- High inflation figures in Australia for July have lessened the chances of an immediate interest rate cut by the Reserve Bank of Australia (RBA).
- According to the CME FedWatch tool, there’s now more than an 89% expectation for a 25 basis point rate cut by the Fed in September.
After a five-day winning streak, the AUD is now trailing behind the USD. The strengthening of the US dollar seems tied to persistent inflation concerns, which raise uncertainty around potential rate cuts by the Federal Reserve. The ISM Manufacturing Purchasing Managers Index (PMI) for August will be closely monitored later today.
The CME FedWatch tool now indicates an increased probability, climbing from 84% just a week earlier, suggesting the AUD/USD pair may recover somewhat, particularly with the anticipated labor market data this week that could influence the Fed’s policy decisions. Key reports to watch include ADP employment changes, average hourly earnings, and non-farm payroll figures for August.
In Australia, the consumer price index for July saw a 2.8% year-on-year rise, outpacing previous expectations and leading to a reassessment of the RBA’s rate decisions. This uptick suggests that an interest rate cut is not likely on the horizon, providing some support for the Australian dollar.
AUD Faces Pressure as US Dollar Improves
- Australia’s building permits decreased by 8.2% in July, which was worse than the anticipated 4.8% drop, following an 11.9% increase earlier.
- Private sector credit grew by 0.7% in July, which marks the fastest expansion since April. On an annual basis, credit growth was recorded at 7.2%, an uptick from the previous 6.9%.
- A recent report indicates that China’s Manufacturing PMI jumped to 50.5 in August from 49.5 in July, signaling that economic shifts in China could affect the AUD, given the close trade relationship between the two nations.
- China’s National Bureau of Statistics also revealed a modest PMI increase, although it still fell short of expectations, signaling ongoing economic challenges.
- The US Dollar Index has rebounded to about 97.70 after five days of losses, with investors weighing the PCE price index’s implications for inflation and interest rates.
- Concerns about the Federal Reserve’s independence are rising, particularly amidst questions regarding Gov. Lisa Cook’s recent decision.
- U.S. Treasury Secretary Scott Bescent emphasized the importance of the Fed’s independence but highlighted potential missteps by the Fed.
- The Core PCE Price Index is stable at 2.9% year-on-year for July, which aligns with market expectations, while monthly increases remain modest.
- A federal appeals court recently upheld a decision on tariffs enacted by former President Trump, which he criticized as partisan.
- San Francisco Fed President Mary Daly commented on the readiness to cut interest rates, noting that inflation resulting from tariffs is temporary.
- Governor Christopher Waller expressed support for rate cuts in September, suggesting further reductions within the following months if needed.
- Fed Chair Jerome Powell acknowledged rising risks in the job market but noted that inflation remains a key concern for policy decisions moving forward.
AUD Testing Resistance at 0.6550
The AUD/USD pair is trading around 0.6550 this Tuesday. Technical analysis suggests it has broken through an upward trend line, which is a positive indicator. The pair is also above the nine-day exponential moving average, signaling strong short-term price momentum.
At its peak, the AUD/USD tested a five-week high of 0.6568, last seen on August 14. There’s a key support level around the nine-day EMA at 0.6520, with another support level at the 50-day EMA of 0.6502. A dip below these levels may trigger a bearish sentiment, possibly bringing the price down to around 0.6414, which was noted on August 21.
AUD/USD: Daily Charts
The table below outlines the current rates for the Australian dollar against other major currencies, indicating its stronger performance against currencies like the Euro and the Pound, but weaker against the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | 0.14% | 0.35% | 0.05% | 0.22% | 0.33% | 0.12% | |
| EUR | -0.16% | -0.03% | 0.28% | -0.10% | 0.10% | 0.19% | -0.04% | |
| GBP | -0.14% | 0.03% | 0.30% | -0.07% | 0.11% | 0.20% | -0.02% | |
| JPY | -0.35% | -0.28% | -0.30% | -0.37% | -0.21% | -0.07% | -0.27% | |
| CAD | -0.05% | 0.10% | 0.07% | 0.37% | 0.14% | 0.32% | 0.06% | |
| AUD | -0.22% | -0.10% | -0.11% | 0.21% | -0.14% | 0.09% | -0.15% | |
| NZD | -0.33% | -0.19% | -0.20% | 0.07% | -0.32% | -0.09% | -0.22% | |
| CHF | -0.12% | 0.04% | 0.02% | 0.27% | -0.06% | 0.15% | 0.22% |
This table provides an overview of the changing rates among major currencies, showing how the Australian dollar is positioned within the broader market context.
