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AUD/USD holds near 0.7167 as Fed rate-hike odds shift

CME FedWatch shows a 65% probability of a 25 basis point hike at the next US meeting, while the US Dollar Index fell to around 99.41 on the day.

Reported · Written up by our desk · Major Pairs

AUD/USD was steady in a narrow range on Monday around 0.7167 as traders balanced hawkish expectations for both the Reserve Bank of Australia and the Federal Reserve, with a modest pullback in the US Dollar helping limit downside.

FXStreet reports Fed rate hike bets picked up after Federal Reserve Chair Kevin Warsh’s Jackson Hole remarks on Friday, where he said inflation is well above target and that interest rates are the Fed’s primary tool to restore price stability. Following the comments, markets repriced September rate hike odds, with the CME FedWatch Tool indicating a 65% probability of a 25 basis point increase at next month’s meeting.

Still, the Greenback lost some momentum on Monday, the US Dollar Index traded near 99.41, down 0.27% on the day, according to FXStreet. Attention is now turning to US labor market data due this week, which could influence the Fed’s September decision.

Geopolitical tensions also remained in focus after renewed hostilities between the US and Iran, keeping energy driven inflation risks elevated. FX strategists at OCBC said their base case is that the RBA has reached the end of its tightening cycle, while a stronger-than-expected CPI and resilient household spending have kept the risk of another rate hike alive.

Latest closeDollar index 99.68 ▲0.5%

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