- AUD/USD moves higher to 0.6750 as US Dollar faces a wrath due to strong speculation for Fed rate-cuts in September.
- Fed Williams communicated the need for more good inflation to gain confidence for Fed rate cuts.
- Aussie Employment data will provide fresh guidance on RBA interest rates.
The AUD/USD pair climbs to near 0.6750 in Wednesday’s European session. The Aussie asset strengthens as the US Dollar (USD) posts a fresh almost four-month low due to firm speculation that the Federal Reserve (Fed) will begin lowering interest rates from the September meeting.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, tumbles to near 103.30. According to the CME FedWatch tool, expectations for a rate-cut move in September appear to be certain. The tool also shows that the Fed will cut interest rates twice this year against one signaled by officials in their latest dot plot.
A rate-cut move in September seems as a done deal as the Consumer Price Index (CPI) report for June suggested that the progress in disinflation has resumed after reversing in the first quarter.
Meanwhile, Fed policymakers have also acknowledged that the central bank has made some progress in inflation but reiterated that they want to gain greater confidence before cutting interest rates.
In European trading hours, New York Fed Bank President John Williams commented that the current rate policy is appropriate to bring inflation down to the bank’s target of 2%. However, he expressed the need for more good data to strengthen confidence. When asked about rate cuts, William said, “An interest-rate cut could be warranted in the US in the coming month,” Wall Street Journal reported.
On the Aussie front, investors look for the labor market data for June, which will be published on Thursday. The Employment report is expected to show that employers hired 20K job-seekers, lower than 39.7K onboarded in May. The Unemployment Rate is expected to remain steady at 4.0%. Signs of strong job demand would boost expectations of further policy-tightening by the Reserve Bank of Australia (RBA). Financial markets expect that the RBA would be one of the laggards to join the global rate-cutting cycle.
Economic Indicator
Employment Change s.a.
The Employment Change released by the Australian Bureau of Statistics is a measure of the change in the number of employed people in Australia. The statistic is adjusted to remove the influence of seasonal trends. Generally speaking, a rise in Employment Change has positive implications for consumer spending, stimulates economic growth, and is bullish for the Australian Dollar (AUD). A low reading, on the other hand, is seen as bearish.