The Australian dollar remained steady on Tuesday, September 3rd, as traders recalibrated their expectations for monetary policy moves from both the Reserve Bank of Australia (RBA) and the Federal Reserve. The AUD/USD pair was last seen at 0.7165, just below its August peak of 0.7207.
RBA Rate Hike Bets Intensify
Market participants are increasingly pricing in the possibility of an RBA rate hike as soon as this month. According to Polymarket, the probability of a September hike has risen to 67%, up sharply from earlier levels. The shift comes amid renewed geopolitical tensions between the US and Iran, which have pushed oil prices higher and added to inflation concerns.
Australia's economic data has also been supportive. The S&P Global services PMI for August came in at 53.2, beating expectations of 52.9, while the composite PMI rose to 52.7, above the forecast of 52.5. A reading above 50 indicates expansion.
On Wednesday, official data revealed that Australia's economy grew by 2.1% in the second quarter on a year-over-year basis, exceeding the 1.8% forecast. Quarter-on-quarter growth was 0.4%, up from 0.3% in the first quarter.
This resilience comes despite the RBA being one of the most hawkish central banks globally. It has already implemented three rate hikes this year, and officials have signaled that further tightening is possible if inflation remains elevated.
Inflation in Australia has stayed stubbornly high, and the recent uptick in energy prices—Brent crude trading near $95.68 and WTI at $91—could keep upward pressure on consumer prices.
Fed Rate Hike Odds Also Rising
Across the Pacific, the odds of a Fed rate hike this month have jumped to 55% on Polymarket. This follows a notably hawkish speech by Kevin Warsh at the Jackson Hole Symposium, where he expressed concerns about inflation remaining above the 2% target for the past five years.
Investors are now awaiting the US nonfarm payrolls report, which is expected to show the economy added over 80,000 jobs in August. A strong labor market could solidify the case for a Fed move.
Technical Outlook: Possible Bearish Reversal
From a technical perspective, the AUD/USD pair may be setting up for a downward move. The daily chart shows a rising wedge pattern, with the two trendlines converging—often a bearish signal. Additionally, the Percentage Price Oscillator (PPO) has formed a bearish crossover, and the Relative Strength Index (RSI) is turning lower.
If the pair breaks lower, the key support level to watch is 0.7000. A drop below that could open the door to further losses. Conversely, a sustained move above the August high of 0.7207 would negate the bearish setup.
For more on currency dynamics, see our analysis of sticky inflation signals and how they might influence central bank decisions.
This article is for informational purposes only and does not constitute financial advice.
