Ella 
AUD/USD pares recent losses as the Reserve Bank of Australia maintains its hawkish bias. Reserve Bank of Australia Governor Bullock said last week it was too early to consider cutting interest rates. The board does not expect to cut interest rates in the near term.
The Australian dollar remains resilient despite soft Chinese inflation data on Monday. China’s consumer price index (CPI) rose 0.6% year-on-year in August, up from 0.5% in July but below expectations of 0.7%. Inflation increased by 0.4% monthly in August, down from 0.5% in July and below expectations of 0.5%. Given the close trade relations between Australia and China, any changes in the Chinese economy may have a significant impact on the Australian market.
RBC Capital Markets now expects the RBA to cut interest rates at its February 2025 meeting, earlier than the May 2025 forecast previously. Although Australia’s inflation remains above the Reserve Bank of Australia’s target, slowing economic growth is not considered sufficient reason to cut interest rates this year.
The dollar found support as Friday’s U.S. economic data increased uncertainty over the prospect of an aggressive rate cut by the Federal Reserve at its September meeting.
The CME Group’s FedWatch tool shows that the market fully expects the Fed to cut interest rates by at least 25 basis points at its September meeting. The odds of a 50 basis point rate cut fell slightly to 29.0%, down from 30.0% a week ago.
