Traders await a key US inflation report that could influence the Federal Reserve’s next rate decision amid mixed expectations.
The Australian Dollar weakened against the US Dollar, with AUD/USD dropping to around 0.7060 in Asian trading on Wednesday. The decline follows a modest rebound in the previous session as the Greenback strengthened ahead of a critical US inflation report, which markets expect to shape the Fed’s next move.
Expectations for a September rate hike have softened, with the CME FedWatch Tool showing a 48% probability, down from 52% a day earlier. The Fed held rates steady in July, but crude oil price increases have fueled debate over a more aggressive policy stance. Geopolitical tensions, including stalled US-Iran negotiations, have also supported the USD.
The Reserve Bank of Australia kept its cash rate at 4.35% in August, though forecasters remain divided on future moves. Market sentiment remains cautious as traders assess the interplay between inflation data and Fed policy signals.