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AUD/USD marches firmly toward 0.6650 as the greenback pares some gains

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  • AUD/USD reached a multi-year low at around 0.6574 but bounced back and is gaining 0.29%.
  • The Summary of Economic Projections (SEP) reported that Fed officials see rates at around 4.4% by the end of 2022.
  • The US Department of Labor reported that Jobless Claims rose less than estimated but exceeded the previous reading.

The AUD/USD rebounds off YTD lows reached at around 0.6574 and is back above the 0.6600 psychological figure as the greenback weakens, following an aggressive rate hike by the Fed, which opened the door for further increases. Even though the previously mentioned would support the greenback, the AUD/USD climbs, trading at 0.6642 at the time of writing.

Global equities remain on the back foot, recording hefty losses. Worldwide central banks continue to tighten monetary conditions amidst a period of two-digit inflation in some countries. On Wednesday, the Fed raised rates by 75 bps. According to the Summary of Economic Projections (SEP), Fed officials estimate another 120 bps of rate increases, seeing the Federal funds rate (FFR) at around 4.4% by the year-end.

AUD/USD is recovering as the US dollar falls

On Thursday, the Labor Department showed that claims for unemployment in the US for the last week, which ended on September 17, increased by 213K, less than the 217K estimated, but above the previous reading, downward revised to 208K. The number of people receiving benefits after an initial week of aid decreased by 22K to 1.379 million in the week ended on September 10.

In the meantime, an absent Australian economic docket left traders to keep digesting the RBA’s minutes released earlier. The central bank noted that it was not in a “pre-set path and would be balanced to try and keep the economy on an even keel.” Furthermore, most of RBA’s board members have begun to assess the possibility of raising rates at a slower pace as the cash rate rises.

However, Westpac analysts expect the RBA to hike 50 bps in October, followed by 25 bps in November, December, and February, lifting rates to 3.6%.

What to watch

On Friday, the Australian economic docket will feature the S&P Global Manufacturing, Services and Composite PMIs.

The US calendar will also reveal the S&P Global PMIs alongside Fed Chair Jerome Powell’s speech at around 18:00 GMT.

AUD/USD Key Technical Levels

 

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