AUD/USD dribbles around 0.6660 as gains inspired by surprise RBA rate hike wane

• AUD/USD looks prone to more losses as the impact of the surprise RBA’s rate hike has started fading.
• Investors have turned cautious about US economic outlook as expectations for further policy-tightening by the Fed have deepened.
• Rising interest rates in Australia are clearly impacting their economic growth.

The AUD/USD pair has displayed a less-confident recovery to near 0.6620 in the early European session after a vertical sell-off from 0.6717. The Aussie asset seems prone to more losses as gains propelled by a surprise interest rate hike by the Reserve Bank of Australia (RBA) have started waning.

S&P500 futures generated significant losses in Asia. US equities have carry-forwarded their pessimism showed on Wednesday, indicating dented market sentiment. Investors have turned cautious about the United States’ economic outlook as expectations for the continuation of the policy-tightening spell by the Federal Reserve (Fed) have deepened.

The US Dollar Index (DXY) has corrected below 104.00 after a V-shape recovery. On a broader note, the USD Index is expected to remain sideways till the release of the US Consumer Price Index (CPI) data, which will release next week. May’s Employment data is already out and now inflation figures will provide more clarity about the interest rate decision by the Fed.

On the Australian Dollar front, the impact of a surprise interest rate hike of 25 basis points (bps) by RBA Governor Philip Lowe to 4.10% has started waning quickly as the decision is being followed by weak economic indicators.

Australia’s Quarterly GDP was expanded by 0.2% while the street was anticipating an expansion of 0.3%. On an annual basis, Q1 GDP dropped to 2.3% vs. the estimates of 2.4%. Apart from that, the surplus in April’s Trade Balance data dropped sharply due to poor export numbers while imports increased, indicating decent domestic demand.

Australian Treasurer Jim Chalmers said on Wednesday that “rising interest rates are clearly impacting the economic growth,” He further added, “Growth momentum is waning,”