AUD Slips as Warsh Lifts September Hike Odds to 60%

The Australian Dollar (AUD/USD) slipped by 0.30% on Friday to around 0.7170, its lowest level since mid-May, as the US Dollar gained strength following hawkish comments from Federal Reserve Chair Kevin Warsh.

In his speech, Warsh reaffirmed that price stability remains the central bank's priority and emphasized the need for confidence that underlying inflation is moving towards the 2% Personal Consumption Expenditures (PCE) target. As a result, rate expectations shifted quickly, with the CME FedWatch Tool showing a roughly 60% probability of a September hike, up from about 36% before the speech.

The Australian Dollar drew some support from the Reserve Bank of Australia's Bulletin, which stated that consumer prices have stayed above its 2%-3% target for much of the post-pandemic period. Inflation data were mixed: Consumer Price Index (CPI) eased to 3.5% year-on-year in July from 3.8% in June, yet remained above the 3.2% consensus, while Trimmed Mean CPI held at 3.6% versus an expected 3.5%.