The Australian dollar remained below $0.70, hovering near multi-week lows, as the US dollar strengthened following the release of hawkish Federal Reserve meeting minutes. The minutes highlighted that policymakers still view inflation as the primary risk to the economic outlook, with several officials indicating that further interest rate increases could be appropriate and others describing current policy as only mildly restrictive.
Despite this, markets remain doubtful about the likelihood of an October Fed rate hike, assigning only a 19% probability to a 25-basis-point increase. In Australia, markets are similarly cautious, pricing in just a 25% chance of another Reserve Bank of Australia hike in November, following last week’s increase in the cash rate to 4.60%.
Investors will be watching closely for the RBA’s October 13 meeting minutes, which will be followed by September labor market data next week. Particular attention will be on the unemployment rate after it climbed to a five-year high of 4.6% in August. A steady or higher unemployment reading could temper expectations of additional policy tightening. Later this month, the September-quarter CPI report will be another key release, with core inflation forecast to remain elevated.
