AUD/USD accelerates its downfall towards 0.6720 after Fed’s hawkish rhetoric

• The AUD/USD to stay downward pressured post-Jerome Powell speech, reiterating the Fed’s commitment to control inflation.
• RBA’s Governor Philip Lowe opened the door for a slower pace of rate increases.
• US Initial Jobless Claims dropped, illustrating the US labor market remains tight.

The AUD/USD remains on the defensive spurred by hawkish commentary by the Federal Reserve Chair Powell on Thursday, while the European Central Bank (ECB) delivered a 75 bps rate hike.

Earlier, the AUD/USD began trading near the day high at around 0.6769 but tumbled towards its daily low at 0.6713, on remarks of the RBA’s Governor Philip Lowe. At the time of writing, the AUD/USD is trading at 0.6725, below its opening price.

AUD/USD drops on dovish RBA Lowe vs. Fed’s Powell hawkish speech

The Fed parade continued ahead of the blackout period. On Thursday, the US Federal Reserve Chair, Jerome Powell, reiterated the Fed is “strongly committed” to taming inflation and added that the Fed  needs to act “forthrightly, strongly as we have been doing.”

Before Wall Street opened, the US Labor Department unveiled Initial Jobless Claims for the week ending on September 3. Data showed that unemployment claims fell to 222K, lower than forecasts of 240K. Sources cited by Bloomberg said that “these timely data are signaling that the labor market is still strong, with layoffs declining, even as the Fed is tightening aggressively to rebalance supply and demand.”

Elsewhere, the US Dollar Index, a gauge of the greenback’s value against its peers, climbs 0.40%, last seen at 109.970, approaching the 110.000 psychological barriers, a headwind for the AUD/USD major.

On the Australian dollar side, the Reserve Bank of Australia (RBA) Governor Philip Lowe said that even though further rate hikes are needed, he’s aware that rates had already risen sharply. Lowe said that the RBA “the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises.”

AUD/USD reacted to this, sending the major towards its daily low before recouping some of those losses to current exchange rates.

What to watch

Further Fed speaking, led by Chicago’s Fed President Charles Evans, will cross wires at 16:00 GMT.

AUD/USD Key Technical Levels