Australian Dollar trades cautiously as Fed and RBA rate hike bets clash
- The Australian Dollar edges lower on Tuesday but holds within its recent range.
- The US Dollar remains supported by Fed rate hike expectations.
- Markets turn their attention to Australia’s upcoming GDP report.
AUD/USD trades with a modest downside bias on Tuesday as softer-than-expected United States (US) economic data fail to generate sustained selling pressure on the US Dollar (USD). Competing hawkish expectations for the Federal Reserve (Fed) and the Reserve Bank of Australia (RBA) keep the pair range-bound, with the Australian Dollar holding within reach of the 0.7206 high touched last week, its strongest level since May 14.
At the time of writing, AUD/USD trades around 0.7157, down roughly 0.11% on the day.
The ISM Manufacturing Purchasing Managers Index (PMI) fell to 54.6 in August from 55.6 in July, missing the market forecast of 55.2. The ISM Prices Paid Index held steady at 71.1, below expectations of 72.0, while JOLTS Job Openings rose to 7.271 million in July from 7.182 million but fell short of the 7.3 million forecast.
The Greenback weakened briefly following the releases before regaining traction. The US Dollar Index (DXY), which measures the US currency against a basket of six major currencies, trades around 99.64, up 0.23% on the day.
The limited reaction reflects persistent expectations that the Fed could raise interest rates in September following Fed Chair Kevin Warsh’s tough stance on inflation at the Jackson Hole Symposium. According to the CME FedWatch Tool, traders see around a 66% probability of a rate hike at the September 15-16 meeting.
Elevated Oil prices due to tensions in the Middle East are adding to global inflation risks, potentially complicating the Fed’s efforts to return inflation to its 2% target while also intensifying price pressures in Australia. Inflation is already proving sticky in the Australian economy, prompting the RBA to deliver three rate hikes earlier this year, while hotter-than-expected July Consumer Price Index (CPI) data strengthen the case for further monetary policy tightening.
The Aussie also draws support from upbeat Chinese data, given Australia’s close trade ties with China. China’s RatingDog Manufacturing PMI rose to 51.5 in August from 50.9. Attention now turns to Australia’s second-quarter Gross Domestic Product (GDP) data, due on Wednesday.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.21% | 0.14% | 0.19% | 0.30% | 0.12% | 0.22% | 0.37% | |
| EUR | -0.21% | -0.06% | 0.02% | 0.09% | -0.09% | -0.01% | 0.15% | |
| GBP | -0.14% | 0.06% | 0.06% | 0.16% | -0.05% | 0.06% | 0.21% | |
| JPY | -0.19% | -0.02% | -0.06% | 0.11% | -0.08% | 0.03% | 0.16% | |
| CAD | -0.30% | -0.09% | -0.16% | -0.11% | -0.20% | -0.11% | 0.05% | |
| AUD | -0.12% | 0.09% | 0.05% | 0.08% | 0.20% | 0.10% | 0.24% | |
| NZD | -0.22% | 0.00% | -0.06% | -0.03% | 0.11% | -0.10% | 0.16% | |
| CHF | -0.37% | -0.15% | -0.21% | -0.16% | -0.05% | -0.24% | -0.16% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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