The Aussie appeared to be emulating the price action from June and the exchange rate may continue to track the negative slope in the moving average as the Federal Reserve prepares US households and businesses for a restrictive policy.
Though, new data announcements coming out of the US may prop up AUD/USD as the core PCE index, the Federal Reserve’s preferred gauge for inflation, is expected to narrow to 4.7% in July from 4.8% per annum the month prior, and signs of easing price pressures may encourage the Federal Open Market Committee (FOMC) to adjust its approach in combating inflation in an effort to foster a soft landing for the economy.
As a result, speculation for smaller Fed rate hikes may produce headwinds for the Greenback as the central bank acknowledges that “it likely would become appropriate at some point to slow the pace of policy rate increases,” and it remains to be seen if the FOMC will adjust the forward guidance at the next interest rate decision on September 21 as Chairman Jerome Powell and Co. are slated to update the Summary of Economic Projections (SEP).
Until then, the Aussie may stage a larger rebound as evidence of slowing inflation curbs bets for another 75bp Fed rate hike, but the recent flip in retail sentiment looks poised to persist as the exchange rate fails to defend the opening range for August.
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