AUD Falls After Sharp Rally

The Australian dollar weakened to below $0.648 on Monday, pulling back from a 1.1% surge in the previous session, with the US dollar seen attempting to recover from Fed Chair Powell’s dovish speech.

At the Fed’s annual Jackson Hole symposium on Friday, Powell indicated a potential interest rate cut at the September 17 meeting, citing rising risks to employment.

Markets are now pricing in nearly an 85% chance of a 25 bps cut in September after the speech, with a total of 48 bps of reductions expected by year-end.

Key upcoming data, including the PCE inflation gauge on Wednesday and August payrolls on Friday, will influence the Fed’s next moves.

Domestically, the Reserve Bank of Australia cut its cash rate by 25 bps last week to 3.60% and is expected to remain cautious, with markets pricing in a possible larger 50-basis-point cut in November.

Traders now await minutes from the August meeting due on Tuesday, which will offer further insights into the central bank’s policy stance.