AUD/USD falls below 0.6600 after RBA decision

• AUD/USD loses traction near 0.6570 following the Reserve Bank of Australia (RBA) policy meeting.
• The RBA decided to keep the rate unchanged at 4.35%, as expected.
• The market has priced in a 97% chance that the Fed will keep the rate unchanged in a range of 5.25% to 5.50% at the next meeting.
• The US ISM Services PMI will be released on Tuesday.

AUD/USD loses ground below the psychological zone of 0.6600 during Asian trading on Tuesday, falling to three-day lows of 0.6571. The pair is facing some selling pressure after the Reserve Bank of Australia’s (RBA) monetary policy decision. The pair is currently trading near 0.6576, down 0.62% on the day.

Reserve Bank of Australia (RBA) board members decided to keep the interest rate unchanged at 4.35% at its December monetary policy meeting held this Tuesday. The governor of the RBA, Michele Bullock, declared that the need for additional hardening of monetary policy to ensure inflation returns to target will be determined by the data and developing risk assessment.

Bullock further stated that keeping the cash rate stable at this meeting would give the RBA time to assess the impact of interest rate rises on demand, inflation and the labor market.

Regarding the Dollar, the president of the Federal Reserve (Fed), Jerome Powell, reinforced expectations that the central bank will no longer raise rates at its December meeting and could begin to cut them in March 2024. According to the tool CME’s FedWatch, the market has priced in a 97% chance that the Fed will keep the rate unchanged in a range of 5.25% to 5.50% at the next meeting and there is more than a 50% chance that the Fed will cut rates. rates by 25 basis points (bp) as early as March next year, up from 21% a week ago. This, in turn, could weigh on the US Dollar and act as a tailwind for AUD/USD.

Market participants will focus on the US ISM Services PMI, due to be released on Tuesday. Third quarter Australian Gross Domestic Product will be released later this week and is expected to remain stable at 0.40%. These figures could trigger volatility in the markets and give a clear direction to the AUD/USD pair.