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AUD/USD rises for third straight day as Fed hike bets fade
CME FedWatch shows the odds of a Fed rate hike at the next meeting have fallen to 35%, down from 47% a month earlier.
AUD/USD extended gains for a third straight session, trading around 0.7110 during Tuesday’s Asian hours, as the US dollar stayed subdued. FXStreet attributed the move to cooling expectations for additional Federal Reserve tightening after weaker US data, including an unexpected drop in July nonfarm payrolls and modest consumer inflation data last week.
As rate-hike expectations have faded, the market’s probability for a Fed move next month fell to 35%, according to the CME FedWatch Tool, down from 47% a month earlier. The report also cited US-Iran geopolitical tensions as a secondary factor influencing overall market dynamics.
In Australia, attention is turning to upcoming domestic data that could affect expectations for the Reserve Bank of Australia. The docket includes the Westpac Consumer Confidence index for August and the second-quarter Wage Price Index, with wage growth projected to increase 0.8% quarter-on-quarter.
Brown Brothers Harriman said the incoming Australian labor market releases are unlikely to materially change the policy outlook, pointing to a forecast of 0.8% q/q wage growth for a third straight quarter and a dip to 3.2% year-on-year. The firm noted that RBA cash rate futures imply 60% odds of a final 25 basis point hike by year end to 4.60%, while arguing the risk is skewed toward a more extended pause.