The AUD/USD pair is trading higher near 0.6810 during the early Asian session on Friday, supported by a softer US Dollar (USD) amid expectations of further rate cuts from the Federal Reserve later this year. Traders are anticipating remarks from Fed official Patrick Harker later today, which could provide additional market insights.
The divergence in monetary policy between the Reserve Bank of Australia (RBA), which maintains a “higher for longer” stance, and the Fed’s easing cycle is likely to impact the pair’s movement in the near term. Following an unexpected 50 basis point rate cut at the recent two-day Fed meeting, new dot-plot projections indicate a gradual easing cycle, with the median for 2024 revised to 4.375%, down from 5.125% in June. These expectations may continue to pressure the Greenback, providing a tailwind for AUD/USD.
Investors are anticipating that the RBA will keep its Official Cash Rate (OCR) unchanged at its upcoming meeting but expect a rate cut later this year. Analysts from the Commonwealth Bank of Australia (CBA) have shifted their forecast for the first RBA rate cut from November 2024 to December 2024, predicting a 25 basis point reduction. They note that recent employment growth and hawkish rhetoric from the RBA Governor suggest December is more likely for the start of monetary normalization.
Additionally, the People’s Bank of China (PBoC) is set to announce its interest rate decision on Friday. Any signs of weakness in the Chinese economy could negatively impact the Australian Dollar (AUD), given that China is Australia’s largest trading partner.
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