Market expectations for a September Fed rate hike drop to mid-June lows after softer US inflation and labor data.
The Australian Dollar steadies near 0.7100 against the US Dollar, close to its highest level in over two months, as the greenback weakens. Investors increasingly price out a Federal Reserve interest rate hike in September, favoring an extended pause amid softer economic data.
Market pricing for a September Fed rate increase has fallen to its lowest since mid-June, driven by benign inflation and a softer labor report. Analysts note that if August data continues this trend, the Fed is likely to remain on hold. TD Securities expects the pause to extend beyond September, citing stable labor conditions and persistent inflation.
The shift in expectations follows recent Fed communications and economic prints, reinforcing a dovish tilt. The AUD/USD pair remains firm as traders reassess the US monetary policy outlook.