The AUD/USD currency pair has experienced a significant decline, dropping below 0.6400. This sharp fall occurred as the Reserve Bank of Australia (RBA) provided a less-hawkish interest rate guidance.
In Tuesday’s European trading session, the Aussie pair weakened after RBA Governor Michele Bullock, while keeping the key Official Cash Rate (OCR) unchanged at 4.35% for the ninth consecutive meeting, offered a stance that was not as aggressive in terms of interest rate hikes. Bullock expressed some confidence that upside risks to price pressures were easing. When questioned about a potential interest rate cut in the February meeting, she stated that the decision would hinge on data, yet was certain that wages and demand were decelerating.
Prior to the RBA’s policy determination, analysts from ANZ and Westpac had forecasted that the RBA would commence reducing interest rates from May 2025.
This week, the Australian Dollar (AUD) is set to face more fluctuations as the domestic employment data for November is due to be released on Thursday.
Concurrently, the US Dollar (USD) is strengthening in anticipation of the United States (US) Consumer Price Index (CPI) data for November, which is slated to be unveiled on Wednesday. The inflation figures will have an impact on market speculations regarding the Federal Reserve’s (Fed) interest rate move during the policy meeting on December 18. According to the CME FedWatch tool, there is an approximately 86% probability that the Fed will lower interest rates by 25 basis points (bps) to a range of 4.25%-4.50%.
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