AUD/USD jumps after Fed says rate hike unlikely

The Australian dollar has steadied after two straight days of sharp swings. AUD/USD is up 0.14%, trading at 0.6532 at the time of writing in the North American session.

It has been a roller-coaster for the Australian dollar this week. The Aussie fell 1.4% on Tuesday, as weak Australian retail sales and a decline in Chinese PMIs combined to send the currency sharply lower. AUD/USD recovered half of those losses on Wednesday, as the US dollar retreated against the majors as the Fed rate announcement was less hawkish than the market had expected.

Fed’s Powell says rate cuts on hold until inflation drops

There was no surprise as the Federal Reserve kept interest rates unchanged for a sixth straight time at the Wednesday meeting. The Fed pointed a finger at high inflation, saying that the downward movement in inflation had stalled in recent months.

Consumer inflation has risen in each of the past two months and underlying inflation remains sticky, complicating the Fed’s battle to bring down inflation to the 2% target. In a follow-up press conference, Powell said that “it will take longer than previously expected” for the Fed to feel confident that inflation will resume the decline to the 2% level.

Powell didn’t provide a timeline for a rate cut, and there is a good possibility that the Fed won’t lower rates at all this year. The markets are hopeful for a cut in November but that won’t happen without a decline in inflation.

AUD/USD Technical

• AUD/USD is putting pressure on support at 0.6509. Below, there is support at 0.6479
• 0.6554 and 0.6584 are the next resistance lines