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AUD/USD slips as Fed outlook jitters lift the US dollar
AUD/USD was around 0.7060 in Asian hours, while odds of a 25 basis point Fed hike in September eased to about 48% from 52% the prior day, according to CME FedWatch data.
The Australian dollar weakened against the US dollar, with AUD/USD falling after modest gains the previous session and trading near 0.7060 during Asian hours on Wednesday, as the greenback firmed ahead of a key US inflation release.
FXStreet reports the inflation reading could strongly influence the Federal Reserve’s next rate decision, with expectations still split after the Fed held rates steady in July. CME FedWatch Tool data showed markets pricing in nearly a 48% chance of a 25 basis point hike in September, down from 52% the day before.
The US dollar also received support amid geopolitical uncertainty tied to the possibility of a US-Iran diplomatic deal, including reports about progress in parallel talks involving Iran and Oman and brief improvements in sentiment around the Strait of Hormuz.
In Australia, the Reserve Bank of Australia kept the cash rate at 4.35% in August, but forecasters differed on the outlook, with MUFG warning energy price risks from US-Iran tensions could trigger an inflation shock and a potential RBA hike as early as September, while NAB expected steady policy through 2026 before cuts later. BNY’s chief analyst also pointed to tighter financial conditions, slower consumer spending, softer housing momentum, and easing labor-market conditions, leaving the path of Australian inflation to the middle of the RBA target as a slower, cautious process.