AUD/USD rises on expectations of a 50 basis point rise in the RBA

• AUD/USD is posting solid gains amid dismal market sentiment.
• Softer-than-expected US employment figures caused expectations for the federal funds rate to be lowered.
• Based on the data, analysts at TDS Securities commented that the RBA could rise 50 basis points.

The AUD/USD regains some ground after hitting new two-month lows over the past week, amid a trading session with negative market sentiment, with US stocks closed for the Labor Day celebration, while European stocks trade in red. Factors such as Europe’s energy crisis, along with high inflation, added to the risks to the global economy.

AUD/USD opened the week near session lows around 0.6770 but was higher and was trading around the 0.6800 figure at the time of writing.

Last Friday’s US employment report beat estimates, but downward revisions in the previous two months eased expectations of a 75 basis point Federal Reserve rate hike. Non-farm payrolls came in at 315,000 vs. an estimated 298,000, while the unemployment rate was 3.7%. That said, Fed Funds futures lost 3.7 basis points on Friday to 63.9 basis points of tightening, right in the middle of the 50-75 basis point range.

Meanwhile, the US Dollar Index posted a decent 0.16% gain to 109.779, capped by sour sentiment.

AUD/USD rises on expectation of a 50 basis point rise in the RBA

On Tuesday, the Reserve Bank of Australia is expected to raise rates by 50 basis points as it struggles to control inflation. Analysts at TD Securities forecast a 50 basis point rate hike based on the thesis that the labor market remains tight, consumer spending is strong and price pressures are widespread.

“A 50bps rally is consistent with previous RBA hikes and in line with hard data results. More important is the language that accompanies a 50bps hike. Is the RBA reinforcing its language/response to the inflation removing “balance” or “the path to achieve this balance is narrow and clouded by uncertainty” Or does the RBA signal a longer rate hike cycle but note a slowing in the pace of rate hikes? the second option”.

What must be considered

Australia’s economic docket will include the RBA’s monetary policy decision, along with the current account balance, exports and real GDP. Fed members will be on the US calendar, with Cleveland President Loretta Mester on Wednesday and Jerome Powell speaking on Thursday. In addition, jobless claims for the week ending September 2, along with the S&P Global and ISM Services PMI, will be the focus of investors’ attention, looking for clues on the economy’s performance. American.

AUD/USD Key Technical Levels