The Australian dollar has posted slight gains on Wednesday. In North American trade, AUD/USD is trading at 0.6865, up 0.16%. We can expect stronger movement from the pair later today, with the Fed rate announcement and the Australian employment report for November.
Australian employment expected to slow
Australia’s labour market has remained resilient, a key factor in the Reserve Bank of Australia being able to deliver steep rate hikes in the tough battle to contain inflation. The economy is expected to add 15,000 jobs in the November release, down from 32,000 a month earlier. The unemployment rate is expected to remain at an ultra-low level of 3.4%.
With inflation still not under control, the RBA continues to raise rates, although it has now delivered three straight hikes of 25 basis points, bringing the cash rate to 3.10%. There is growing speculation that the RBA could wind up its current rate cycle early in 2023. The next meeting is not until February, with the most likely scenario being another 25 bp increase.
Markets eye Fed rate hike
A record year of tightening from the Federal Reserve is expected to end with a 50-basis point hike at today’s final meeting of 2022. The timing is interesting, as the meeting comes just one day after Tuesday’s US inflation report, which saw CPI fall to 7.1%, down from 7.7% and below the forecast of 7.3%. The declines in the most recent inflation reports are good news for the Fed, but at the same time, inflation remains more than three times the Fed’s target of 2%. The markets will be looking for hints regarding Fed plans for early 2023 – will the rate statement send a hawkish message, or will the Fed acknowledge that the current tightening cycle has largely done the job?
- AUD/USD is testing resistance at 0.6875. Above, there is resistance at 0.6954
- There is support at 0.6772 and 0.6693
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