AUD/USD Q4 Outlook: RBA and Fed Hikes Set Tone
The Australian dollar is entering its fourth quarter with monetary policy firmly back in control. The Reserve Bank of Australia (RBA) and the Federal Reserve are set to deliver interest rate hikes, which will impact AUD/USD.
Markets expect at least one more RBA hike to take the cash rate to 4.60%, while the Fed's updated projections point to a median year-end policy rate of 4.1%. This suggests another hike is possible before the end of the year, with market pricing assigning around a 76% chance of an increase in October.
Despite the expected hikes, the AUD/USD has retreated from its Q3 highs due to US dollar strength and broader risk sentiment outweighing the increasingly supportive yield differential. The Australian economy is slowing down, but inflation remains high at 3.6% year-on-year, making it difficult for the RBA to declare victory.