- AUD/USD falls from weekly highs around 0.6830 as the odds of an aggressive Fed hike increase.
- US ISM non-manufacturing activity for August surprisingly beat estimates, easing US recession fears.
- Australian GDP for the second quarter, quarterly and yearly will be released in the Asian session on Wednesday.
The AUD/USD falls below its opening price, snapping two days of gains after the Reserve Bank of Australia raised rates as expected. However, upbeat US economic data fueled estimates that the US Federal Reserve would indeed raise the Federal Funds Rate (FFR) by 75 basis points at the meeting on 21 and September 22.
AUD/USD reached Tuesday’s high after the RBA decision around 0.6832. but it extended its losses, despite the fact that Philippe Lowe and company reiterated that the central bank is not finished tightening monetary conditions. Thus, the AUD/USD extended its losses at the beginning of the American session and is trading at 0.6732 at the time of writing this report.
AUD/USD falls on positive US economic data, despite RBA rate hike
During the American session, the US non-manufacturing PMI for August rose to 56.9, above forecasts of 54.9, and surpassed July’s reading of 56.9. Furthermore, new orders rose to 61.8, up from 59.9 in July, while prices paid slowed to 71.5 from 72.3, indicating that rising interest rates are starting to weigh on the economy.
Earlier in the Asian session, the Reserve Bank of Australia decided to raise rates by 50 basis points, as analysts estimated. In addition, the central bank kept the door open for further increases, but they do not follow a pre-established path and will be guided by the economic data that arrives and by the outlook for inflation and the labor market.
Later, the Australian economic docket will include Q2 GDP, which is estimated to be around 1% qoq and 3.5% yoy. TD Securities analysts estimate GDP at 1.3% quarter-on-quarter and 3.9% year-on-year.
“This should beat market and RBA forecasts of 1% qoq and 3.5% yoy. In terms of breakdown, we expect consumption 1% qoq, investment 0.6% qoq, net exports 0.8% and stocks 1.5%QoL We don’t think a softer result (0.7%QoL or less) will materially change the RBA’s outlook in the short term, but a figure of 1.5%QoL or higher is likely to be viewed by the market as a hawkish move.” , TDS analysts noted.
In the US, Cleveland Fed President Loretta Mester will speak on Wednesday.
AUD/USD Key Technical Levels
Source: Fx Street
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