The Australian dollar recovers slightly but remains capped by a stronger USD and Fed rate hike expectations.
The AUD/USD pair recovered to 0.7115 after dipping to 0.7085, its lowest level since April 14. The rebound remains limited as the USD strengthens to a six-week high, driven by geopolitical tensions and hawkish Fed expectations.
Investors anticipate the Fed may raise rates by at least 25 basis points in 2026, with over a 50% probability priced in. Elevated US Treasury yields and concerns over inflationary pressures from energy prices support the USD, capping the AUD’s upside.
Markets await the FOMC Minutes for further clues on the Fed’s policy path, with traders cautious about placing fresh bets ahead of the release.