The Australian dollar falters below 0.6500 while RBA rate cuts weigh on the feeling

• The Australian dollar struggles to stay below 0.6500, pressed by the betting of RBA rates and a feeling of cautious risk.
• It is widely expected that the RBA reduces the 3.60% cash rate at its meeting on August 12, marking its sixth rate cut since August 2024.
• Australia’s TD-MI inflation index, published by the Melbourne Institute, rose 0.9% intermensual and an interannual 2.9% in July.

The Australian dollar (AUD) loses traction against the US dollar (USD) on Monday, since the dollar stabilizes after the disappointing report of non -agricultural payrolls (NFP) on Friday. The Julio Employment Report presented a clear missing surprise. The data has significantly increased the probability of a rate cut in the next monetary policy meeting of the Federal Reserve (FED) in September. This marks a clear change in feeling, after the decision of the Fed last week to keep the fees without changes. Even so, the growing betting bets keep the US dollar under pressure.

The Aud/USD torque is quoting modestly down, struggling to overcome the key psychological level of 0.6500. At the time of writing, the pair is about 0.6465, while the markets become cautious before the monetary policy decision of the Bank of the Australian Reserve (RBA) on August 12.

It is widely expected that the Central Bank will reduce the cash rate at 25 basic points to 3.60% at its next two -day policy meeting that ends on August 12. The anticipated movement follows a sustained decrease in price pressures, with the underlying inflation-the preferred RBA indicator-going down to 2.7% year-on-year in June, comfortably within the target range of 2-3% of the Central Bank. The increase in unemployment and deceleration of salary growth have further reinforced the case for a relief of monetary policy, with markets currently valuing in about 95% the probability of a rate cutting next week.

However, the last TD-MI inflation index, published by the Melbourne Institute on Monday, has added a cauture note. The index showed a strong increase of intermennsual 0.9% in July, compared to 0.1% in June, marking the largest monthly increase in 19 months. In annual terms, inflation rose to 2.9% year -on -year, while cutting average inflation increased by 0.8% intermennsual, its largest jump in almost two years. These figures contrast with IPC data of the second most moderate trimester and suggest that underlying price pressures can continue to persist.

Although monthly inflation impression could complicate the short -term perspective of the RBA, most analysts believe that it is unlikely to derail a widely expected rate cut next week. However, the Central Bank could adopt a more cautious tone in its future orientation. According to several economists, the RBA could point out as soon as the next week that its cycle of rate cuts is close to its end, which could discourage market expectations on a deeper relief path. The change occurs while the central banks at the global level weigh the persistent impact of the Trump administration tariffs on inflation and growth perspectives. The governor of the RBA, Michele Bullock, also highlighted the increased external risks, citing the fragile global perspective and tariff tensions between the US and China, which could feed imported inflation and interrupt the flows of goods, a key factor for the economy dependent on Australia’s trade.

On the American side, in addition to the disappointing labor market data on Friday, the latest factory orders report added a cautious tone around the economic perspectives of the US 4.9%.

Despite the weak data, the US dollar is trying to stabilize after the generalized mass sale of last week, supported by a modest rebound in the yields of the US Treasury bonds at the time of writing, the index of the US dollar (DXY), which measures the dollar in front of a basket of six main currencies, is quoting around 98.77.