- AUD/USD retreats near 0.6810 in early Monday's Asian session.
- Anticipation of further Fed rate cuts this year may put pressure on the USD in the near term.
- The Reserve Bank of Australia (RBA) is expected to keep the Official Cash Rate (OCR) unchanged at its September meeting on Tuesday.
The AUD/USD pair trades with a slight negative bias around 0.6805 in the early Asian session on Monday, as a weaker Australian Dollar (AUD) poses a challenge for the pair. Investors will be closely watching the flash US Purchasing Managers Index (PMI) reading for fresh momentum.
Last week, the US Federal Reserve (Fed) implemented a larger-than-expected half-point interest rate cut, bringing rates to a range of 4.75% to 5.00%. Policymakers also projected an additional 75 basis points (bps) of rate cuts by year-end, which could continue to pressure the US Dollar (USD) against the AUD. Fed Chair Jerome Powell emphasized that the move demonstrated the Fed's commitment to maintaining low unemployment as inflation eases.
Philadelphia Fed President Patrick Harker commented on Friday that the central bank has successfully steered through a challenging economic landscape in recent years, stressing the importance of both "hard" and "soft" data in decision-making.
On the Australian front, data released by Judo Bank and S&P Global on Monday revealed a dip in the country's economic performance. The preliminary reading of Australia's Judo Bank Manufacturing PMI fell to 46.7 in September from 48.5 in August. Meanwhile, the Services PMI eased to 50.6 from 52.5, and the Composite PMI declined to 49.8 from 51.7. The AUD experienced mild losses in response to the weaker PMI figures.
The Reserve Bank of Australia (RBA) is set to announce its interest rate decision on Tuesday, with expectations for the Official Cash Rate (OCR) to remain steady at 4.35%. RBA Governor Michele Bullock has stated that an interest rate cut is not expected in the "near term," and the RBA will not be influenced by other countries' rate reductions.
Australia's economy showed resilience in August, adding more jobs than anticipated, while the unemployment rate held steady at 4.2%, as reported by the Australian Bureau of Statistics last week. This steady labor market reduces the likelihood of near-term interest rate cuts. The RBA’s rate decision will be in the spotlight on Tuesday, followed by a press conference with Governor Bullock.
