- The outlook for the Australian economy and inflation will depend on the data.
- RBA forecasts show that inflation will only reach the target of 2-3% at the end of 2025.
- Markets have cut the odds of a 50 basis point Fed rate cut in September to 52%.
The AUD/USD outlook shows bullish sentiment as the Aussie climbs post-RBA, indicating uncertainty about the outlook for the economy and inflation. As a result, the path to 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 the data. Policymakers have maintained a hawkish stance as core inflation remains high. Moreover, the RBA forecasts show that by the end of 2025, it will reach the target of 2-3%.
Policymakers remained cautious despite cooler-than-expected inflation data. RBA Governor Michelle Bullock said last Thursday that the central bank would not hesitate to raise rates to control inflation. Moreover, rates in Australia have not risen as high as in other countries. As a result, policymakers believe they should hold them steady for longer before cutting. Therefore, the RBA is likely to be among the last central banks to start lowering rates.
On the other hand, interest rate cut expectations in the US have softened as fears of a recession have eased. In particular, data last week revealed a drop in US jobless claims, showing that the labor market remains strong. Accordingly, markets have cut the odds of a 50 basis point Fed rate cut in September to 52%. At the beginning of last week, this number was above 80%.
All eyes are now on the US wholesale and consumer inflation reports this week. In addition, the US will release a report on retail sales. If inflation eases and sales fall, bets on a rate cut will increase. Meanwhile, any sudden jump will reduce the Fed’s rate cut expectations.
AUD/USD key events today
Markets are not expecting big economic reports today, which means the pair could move sideways.
Technical Outlook AUD/USD: The price is trading in a mild bullish trend
On the technical side, the AUD/USD price is in a weak bullish trend above the 30-SMA. Moreover, the price is moving shallowly, indicating that the bulls are stalling. At the same time, the RSI is trading above 50 but has not touched the overbought region.
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However, the price broke above the 0.6550 resistance to make a higher high. If this trend continues, the price will reach the resistance of 0.6700. However, bears will take control if AUD/USD breaks below the 30-SMA.
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