Australian Dollar Maintains Slide Against Dollar Amid Hawkish US Fed

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The Australian dollar continued to slide in the Asian session as the US dollar extended gains. Despite comments from RBA Governor Lowe, the currency failed to recover. Lowe indicated that the RBA is keeping an open mind and that further rate hikes are necessary.

However, his remarks were drowned out by similarly hawkish comments from Federal Reserve policymakers. Fed policymakers James Bullard and Loretta Mester both stated that they would not rule out a 50 bps hike at the March meeting. This was in response to US PPI data, which recorded its largest increase since June 2022.

As a result, the recent moves in AUD/USD can be attributed to the US dollar as the market continues to reprice the Fed Funds peak rate. This week’s upbeat economic data out of the US also strengthened the narrative.

Australian Dollar Traders to Closely Watch RBA Interest Rate Decision

Looking ahead, the US economic calendar is relatively quiet for the rest of the day, with Federal Reserve policymaker Thomas Barkin speaking and the CB Leading Index for January out of the US. Neither of these events is expected to have any significant impact on the markets ahead of the weekend.

Currently, the probability of a further 25 basis point hike at the RBA meeting on March 7 stands at 76%. Traders and investors will be closely monitoring the situation to see if the RBA will proceed with the planned hike or adjust its stance due to the recent developments in the US.

In conclusion, the AUD/USD pair will remain volatile in the coming days as market players digest the recent economic data and the comments from central bank officials. It is important for traders to keep a close eye on any news that could affect the currency pair.