AUD Retreats from Highs as Warsh's Hawkish Message Lifts US Dollar

The Australian Dollar retreated from its highs on Friday, losing ground against the US Dollar after Federal Reserve Chair Kevin Warsh delivered a hawkish message. The AUD/USD pair dropped 0.30% to trade around 0.7170 at the time of writing.

Warsh emphasized that price stability is the Fed's top priority and warned that policymakers still have work to do to achieve it. He acknowledged that recent inflation data has been better than expected but stressed that it's not enough to demonstrate a meaningful shift in underlying price dynamics.

The hawkish tone from Warsh triggered a significant repricing of monetary policy expectations, with markets now assigning a 60% chance to an interest-rate hike at the Fed's September meeting. This shift supported the US Dollar and put downward pressure on AUD/USD.