AUD/USD Prices Dip on Dovish RBA Minutes, Look to US News Next

TALKING POINTS: AUD/USD, RBA, FED, US-CHINA TRADE WAR

• AUD/USD fell following release of RBA August meeting minutes, paring earlier gains
• Near-term rate adjustment still unlikely, above average 2H 2018 job growth expected
• FOMC minutes, Fed. Chair Powell’s speech, and US-China trade war in spotlight next

The Australian Dollar slightly weakened against its US counterpart after the Reserve Bank of Australia released minutes from its August 7th policy meeting, continuing the currency pair’s long-term downside momentum. Prior to the data release, AUD/USD hit a one-week high as the Aussie Dollar rebounded from 20-month lows against the greenback, thanks to President Trump’s comments on the Fed and China weighing on USD. Australian Prime Minister Malcolm Turnbull’s survival of a leadership challenge also offered the risk-on unit some volatility ahead of the RBA release.

AUD/USD 5-minute Chart

The central bank noted in its minutes that US trade policy is still a source of global uncertainty, and that stronger-than-expected US growth could see the Australian Dollar weaken. It also mentioned that while local jobs are expected to grow at an above-average pace in the second half of 2018, there is no strong case for near-term policy adjustment. These remarks are in line with Governor Lowe’s speech earlier during Tuesday’s Asia Pacific trading session. The central bank head remarked that since the local economy has recently been improving, the next rate change will likely be a hike. However, markets do not price at a better-than-even chance (51.0%) of a hike until August 2019, as the monetary policy authority has consistently maintained that the current 1.50% rate is necessary for sustainable economic growth and does not see inflation to pick up until 2019 or 2020.

Ahead, a lack of significant upcoming Aussie data aside from the Westpac Leading Index on Wednesday means that the currency pair will find its next moves in American economic events and market-wide risk sentiment. The greenback is likely to be impacted by the release of the FOMC’s August 1 meeting minutes and forward guidance from Federal Reserve Chair Jerome Powell’s speech at the central bank’s Jackson Hole symposium. Looking to risk trends, persistent trade war optimism on news of US-China trade talks may cause the Australian Dollar to rally alongside equities. In addition, AUD/USD may furthermore pare its losses if President Trump’s comments regarding China and the Fed continue to weigh on the greenback.

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