AUD/USD posts modest losses to below 0.6550 as RBA delivers dovish cut

• AUD/USD softens to around 0.6530 in Wednesday’s early Asian session. 

• RBA cut its OCR by 25 bps on Tuesday and downgraded the annual economic outlook for the country.

• US CPI rose 2.7% YoY in July, softer than expected. 

The AUD/USD pair trades with mild losses near 0.6530 during the early Asian session on Wednesday. The Australian Dollar (AUD) edges lower against the Greenback after the Reserve Bank of Australia (RBA) delivered a dovish rate cut at its August meeting. Traders will keep an eye on Fedspeak later on Wednesday. 

As widely expected, the RBA cut its Official Cash Rate (OCR) by a quarter point to 3.60% from 3.85% and signaled further policy easing might be needed to meet its inflation and employment targets as the economy lost some momentum. The Australian central bank also downgrades its economic growth forecast for 2025 to 1.7% from 2.1%, saying that a weaker-than-expected rise in public demand in early 2025 was unlikely to be offset through the rest of the year. 

Swaps imply just a 34% possibility that the RBA would follow up with a September cut, although two more rate reductions by early next year are fully priced in to 3.1%

Data released by the US Bureau of Labor Statistics (BLS) on Tuesday showed that the US Consumer Price Index (CPI) rose 2.7% on a yearly basis in July, versus 2.7% prior. This reading came in softer than the market expectation of 2.8%. Meanwhile, the annual core CPI climbed by 3.1% in July, compared to the 2.9% rise seen in June, above the market consensus of 3%.

Futures market pricing is pointing strongly to a Federal Reserve (Fed) rate cut in September, which might weigh on the US Dollar (USD) and cap the downside for the pair. Traders will take more cues from the speeches from Fed officials later on Wednesday, including Austan Goolsbee and Raphael Bostic.