Australian Dollar Steady; Fed and RBA in Focus

The AUD/USD pair held steady around 0.7130 during Wednesday's trading (Sept 16) as investors adopted a cautious stance ahead of the Federal Reserve's interest rate decision. Expectations of a US rate hike are bolstering the dollar, while the prospect of further tightening in Australia provides support for the Aussie.

Markets are pricing in a roughly 92% probability that the Fed will raise interest rates by 25 basis points at its September meeting. With this decision largely priced in, investor attention will shift to Fed Chair Kevin Warsh's press conference and the outlook for future policy.

If Warsh signals that the Fed is in no rush to raise rates again, the US dollar could weaken, potentially allowing the AUD/USD to strengthen. Conversely, signals that further hikes remain on the table could strengthen the dollar and put downward pressure on the pair.

On the Australian front, the Reserve Bank of Australia (RBA) has held the Official Cash Rate at 4.35% for the last three meetings, following three consecutive prior hikes. However, persistent inflationary pressure has led markets to anticipate a roughly 78% chance that the RBA will raise rates to around 4.60% at its next meeting.

Newsmaker Analysis: The AUD/USD is currently positioned between two sets of monetary tightening expectations. The potential for an RBA rate hike helps limit the Aussie's decline, but its short-term direction remains heavily dependent on the Fed. If Warsh maintains a hawkish stance, the AUD/USD risks falling from the 0.7130 level, whereas a more cautious tone could pave the way for the pair to strengthen. (arl)

Source: Newsmaker.id