AUD/USD Remains Depressed Around Mid-0.6600s, Just Above Two-Week Low On Stronger USD

The AUD/USD pair remains under some selling pressure for the second successive day on Wednesday and drops to over a two-week low during the early European session. Spot prices, however, trim a part of intraday losses and now trade with a mild negative bias, just below mid-0.6600s.

The US Dollar (USD) climbed to a nearly two-month high amid hawkish Federal Reserve (Fed) expectations and is a key factor weighing on the AUD/USD pair. On Tuesday, Cleveland Fed President Loretta Mester said that interest rates are not at a sufficiently restrictive level and that the central bank isn’t at the spot to hold rates yet. This further fuels speculations that the US central bank will keep interest rates higher for longer and continues to underpin the Greenback.

That said, a modest downtick in the US Treasury bond yields might hold back the USD bulls from placing aggressive bets. Apart from this, a generally upbeat tone around the equity markets could cap gains for the safe-haven buck and support the risk-sensitive Aussie. Any meaningful recovery, however, still seems elusive amid worries about a deeper global economic slowdown, warranting some caution before confirming that a one-week-old downtrend has run its course.

The softer Chinese macro data released Tuesday pointed to a shaky post-COVID recovery in the world’s second-largest economy. This comes on the back of a standoff to raise the federal government’s borrowing limit and fuels recession fears. The Wall Street Journal (WSJ) reports that House Democrats will begin collecting signatures Wednesday for a discharge petition to raise the debt ceiling in a desperate attempt to circumvent House Republican leadership and force a vote.

This should keep a lid on any market optimism and contribute to capping the upside for the AUD/USD pair. Market participants now look to the US economic docket, featuring the release of Housing Starts and Building Permits, for some impetus later during the early North American session. Apart from this, the US bond yields and the broader risk sentiment will influence the USD price dynamics and contribute to producing short-term opportunities around the major.

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