The Australian Dollar (AUD) is holding steady above 0.6950 against the US Dollar (USD) during early Asian trading on Monday. This strength comes as expectations for a Federal Reserve (Fed) rate hike fade, weakening the USD. Fed officials, including Chairman Kevin Warsh, have signaled no urgency to tighten policy further, which has helped stabilize Treasury yields and undermined the Greenback. According to the CME FedWatch Tool, markets now see an 83.9% chance that the Fed will keep rates unchanged at its October 27-28 meeting, up from 49% a month earlier.
Meanwhile, Reserve Bank of Australia (RBA) Assistant Governor Chris Kent noted that neutral rates are rising in Australia and abroad, though he questioned whether current policy is restrictive enough. Traders are now awaiting Chinese economic data, including GDP, Industrial Production, and Retail Sales, which could impact the AUD as China is Australia's major trading partner.
Strategists at UOB Group observe that the AUD/USD pair has shifted to a more negative technical tone over the 1-3 week horizon. The pair recently broke below its previous range of 0.6935 to 0.7020, with downward momentum increasing but not yet strong. UOB suggests that any decline may not reach the June low of 0.6865, while a breach of 0.6980 could signal a return to range-bound trading.
Fed Chair Warsh delivered a cautious message at an IMF event, highlighting structural growth and investment surges but avoiding any policy pre-commitment. His speech scored 5.6/10 on the FXS Speechtracker, slightly below the historical average, indicating softer conviction. Warsh emphasized AI as a near-term demand catalyst with uncertain employment effects, keeping policy options open and tempering any immediate hawkish impact on the Dollar.