AUD/USD falls sharply below 0.6800 despite RBA’s rate hike, Aussie GDP data eyed

• AUD/USD falls from weekly highs at around 0.6830s due to increased odds of an aggressive Fed hike.
• US ISM Non-Manufacturing activity for August surprisingly exceeded estimations, easing US recession worries.
• Australia’s GDP for the Q2, quarterly and yearly, is eyed on Wednesday’s Asian session.

The AUD/USD dives below its opening price, snapping two days of gains after the Reserve Bank of Australia hiked rates as expected. However, upbeat US economic data fueled estimations that, indeed, the US Federal Reserve would hike by 75 bps the Federal Funds Rate (FFR) in the September 21-22 meeting.

The AUD/USD reached Tuesday’s high after the RBA’s decision around 0.6832. but extended its losses, despite Philippe Lowe and Co. reiterating that the central bank is not done with tightening monetary conditions. So the AUD/USD extended its losses earlier in the North American session and is trading at 0.6732 at the time of writing.

AUD/USD dives on positive US economic data, despite RBA’s rate hike

During the New York session, August’s US ISM Non-Manufacturing PMI rose to 56.9, higher than forecasts at 54.9, and topped July’s 56.9 reading. Furthermore, New Orders increased to 61.8, more than 59.9 in July, while Prices Paid slowed to 71.5 from 72.3, signaling that higher interest rates are beginning to affect the economy.

Earlier in the Asian session, the Reserve Bank of Australia decided to raise rates by 50 bps, as widely estimated by analysts. Furthermore, the central bank kept the door open for further increases, but they are not on a pre-set path and would be guided by incoming economic data and the outlook for inflation and the labor market.

Later in the day, the Australian economic docket will feature GDP for Q2, with estimates at around 1% QoQ and 3.5% YoY. Analysts at TD Securities estimate GDP at 1.3% QoQ and 3.9% YoY.

“This should pip the market’s and the RBA’s 1% q/q, 3.5% y/y forecast. In terms of breakdown, we expect consumption +1% q/q, investment +0.6% q/q, net exports +0.8% ppt, and inventories +1.5% q/q. We don’t think a softer outcome (0.7 % q/q or below) will materially change the near-term RBA outlook, but a print of 1.5% q/q or above is likely to be viewed as hawkish by the market,” TDS analysts noted.

On the US front, Cleveland’s Fed President Loretta Mester is due to speak on Wednesday.

AUD/USD Key Technical Levels