AUD Weakens to Near 0.7150 Amid Fed Hawkish Signals

The Australian Dollar (AUD) weakened to near 0.7150 in Monday's early Asian session, as Federal Reserve Chair Kevin Warsh hinted at potential rate hikes to combat elevated inflation.

Warsh delivered a hawkish-leaning message during his debut speech at the Jackson Hole symposium on Friday, saying that policymakers would need to take action if underlying inflation doesn't appear to be cooling. He emphasized that financial conditions are not truly restrictive and credit markets show few signs of restraint, leaving the door open for further tightening.

The FXS Speechtracker score signaled a stronger-than-usual emphasis on price stability compared to the established baseline, with Warsh's comments supporting the US Dollar and broadly negative for risk-sensitive assets. The AUD/USD pair lost traction as the US Dollar strengthened against it during the early Asian session on Monday.

China's NBS PMI data release later on Monday will be closely watched by traders, who are bracing for stronger-than-expected outcomes that could help limit the Aussie's losses. UOB Group analysts noted that the recent AUD/USD upswing is beginning to lose some steam as key resistance levels come into view, but they still see a chance for AUD to test 0.7220 before the risk of a pullback increases.