- The outlook for Australia’s economy and inflation will depend on data.
- RBA forecasts show that inflation will only reach the 2-3% target at the end of 2025.
- Markets have lowered the chances of a 50 bps Fed cut in September to 52%.
The AUD/USD outlook shows bullish sentiment as the Aussie climbs after the RBA, which indicated uncertainty about the outlook for the economy and inflation. As a result, the path for RBA rate cuts remains clouded.
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On Monday, RBA Deputy Governor Andrew Hauser noted that the outlook for Australia’s economy and inflation will depend on data. Policymakers have maintained a hawkish stance as underlying inflation remains high. Moreover, RBA forecasts show it will only reach the 2-3% target at the end of 2025.
Policymakers have remained cautious despite cooler-than-expected inflation figures. Notably, RBA Governor Michelle Bullock said last Thursday that the central bank would not hesitate to hike rates to control inflation. Moreover, Australia’s rates did not rise as high as other countries. As a result, policymakers believe they should keep them steady for longer before cutting. Therefore, the RBA will likely be among the last central banks to start lowering rates.
On the other hand, US rate cut expectations eased as recession fears reduced. Notably, data last week revealed a drop in US jobless claims, showing the labor market remains strong. Consequently, markets have lowered the chances of a 50 bps Fed cut in September to 52%. At the start of last week, this figure was above 80%.
All eyes are now on US wholesale and consumer inflation reports this week. Additionally, the US will release the retail sales report. If inflation eases and sales drop, rate-cut bets will rise. Meanwhile, any surprise jumps will reduce Fed rate cut expectations.
AUD/USD key events today
Markets are not expecting major economic reports today, meaning the pair might move sideways.
AUD/USD technical outlook: Price trades in a tepid bullish trend
On the technical side, the AUD/USD price is in a weak bullish trend above the 30-SMA. Moreover, the price is making shallow swings, indicating bulls are holding back. At the same time, the RSI trades above 50 but has not touched the overbought region.
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Nevertheless, the price has broken above the 0.6550 resistance to make a higher high. If this trend continues, the price will reach the 0.6700 resistance. However, bears will take control if AUD/USD breaks below the 30-SMA.
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Saqib Iqbal
