The AUD/USD currency pair is showing signs of weakness as it maintains its position above the 0.6790 mark heading into the European session on Wednesday. Currently trading around 0.6795, the pair has experienced a decline of 0.24% for the day.
Investors are closely analyzing the recently released meeting minutes from the Reserve Bank of Australia (RBA) while keeping a watchful eye on the developments in Sino-US relations.
Following a softer US inflation data and an easing labor market, market participants believe that the Federal Reserve (Fed) is nearing the end of its policy tightening cycle. It is anticipated that the Fed will keep interest rates unchanged following the widely expected 25 basis points (bps) increase in the July meeting.
According to the CME Group FedWatch Tool, there is nearly complete pricing for a 25 basis point Fed rate hike in July. The likelihood of another rate hike in December stands at approximately 20%.
Adding to the economic picture, recent data revealed that US Industrial Production fell 0.5% in June for the second consecutive month, surprising the market, which expected no change. Meanwhile, Retail Sales saw a modest increase of 0.2% MoM from June, reaching $689.5 billion. This figure was below the market consensus of a 0.5% gain.
Turning attention to the Australian Dollar, the RBA minutes released in Asia suggested the possibility of further policy tightening, but policymakers will reassess the situation at the August policy meeting.
In relation to US-China relations, China’s defense minister, Li Shangfu, urged the US to exercise sound strategic judgment in its dealings with China during a meeting with senior US diplomat Henry Kissinger in Beijing on Tuesday. Market players will closely monitor the developments in Sino-US relations for potential impact on the currency pair.
Looking ahead, Australia is set to release important data on Employment Change and Employment Change on Thursday. Additionally, market participants will keep an eye on US Housing Starts and Unemployment Claims, as these figures could significantly influence the direction of the AUD/USD pair in the near future.
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