The Australian Dollar edges up despite cooling inflation as the Fed maintains rates but hints at further tightening to hit 2% inflation.
AUD/USD climbed to 0.6960 in Asian trading Thursday, recovering from two days of losses. The move comes despite a hawkish pause by the Federal Reserve, which kept rates steady at 3.5%–3.75% but signaled a firm commitment to its 2% inflation target.
Markets had widely anticipated the Fed’s decision, though dissent from three regional presidents advocating a 25 basis point hike underscored lingering hawkish sentiment. Fed Chair Kevin Warsh reinforced this stance, stating the central bank would take all necessary actions to curb inflation, dismissing short-term data as insufficient for policy shifts.
The Fed’s resolute tone, measured at 7/10 on the FXS Speechtracker, contrasts with cooling domestic inflation in Australia, leaving the AUD vulnerable to potential USD strength if tightening expectations persist.