AUD/USD hovers below 0.6450, almost flat, despite a risk-on sentiment

• AUD/USD oscillates around 0.6440s, ahead of 2022 lows reached around 0.6436.
• Fed’s Evans: Expects the Federal funds rate (FFR) to be around 4.50-4.75%.
• Fed’s Bullard: Recession risks had risen but attributed to external shocks; expects the FFR to be at 4.50% by the end of 2022.

The AUD/USD is extending its losses during the day, down by 0.17%, bouncing off the YTD lows of 0.6436, reached on Monday, as markets calmed. Risk-aversion triggered by a bold move of the new UK government spurred a global bond sell-off, alongside broad GBP weakness, consequently bolstering the greenback, a headwind for risk-sensitive currencies. At the time of writing, the AUD/USD is trading at 0.6442, below its opening price.

AUD/USD drops by a minimal margin amidst a risk-on sentiment

As the North American session progresses, US equities are trading in the green. Fed officials led by Chicago’s Fed President Charles Evans and the St. Louis Fed James Bullard crossed newswires on Tuesday.

Charles Evans said that the Fed needs to hike rates to the 4.50-4.75% range, more aggressive than he previously thought, further cementing the central bank’s commitment to curb inflation. He did not see a “recession-like” scenario and echoed Boston’s Collins comments that the unemployment rate should rise to ease inflationary pressures.

Of late, the St. Louis Fed President James Bullard said that they have “a serious problem of inflation in the US,” while adding that risks of a recession had risen, but said that it could be caused by external factors, like Europe and China, pulling the world into a slowdown. He added that raising rates to around 4.5% by the year’s end would slow the economy and quell inflation.

Data-wise, the US economic calendar featured Durable Good Orders for August, which dropped 0.2% MoM, less than the estimated 0.3% contraction. Later, the CB Consumer Confidence jumped in September for the second consecutive month, up at 108 vs. estimates of 104.6.

Lyn Franco, Senior Director of Economic Indicators at the Conference Board, said, “Consumer confidence improved in September for the second consecutive month, supported in particular by jobs, wages, and declining gas prices.” Franco added, “Meanwhile, purchasing intentions were mixed, with intentions to buy automobiles and big-ticket appliances up, while home purchasing intentions fell.”

At the same time, the US Census Bureau reported that New Home Sales for August unexpectedly rose by 0.685M, higher than estimates of 0.5M. Sources cited by Bloomberg said, “The housing market has felt the biggest impact from higher borrowing costs; so, although I’ll gladly welcome an increase in sales, we know that the bigger picture shows slowing activity.”

AUD/USD Key Technical Levels