AUD/USD strengthens above 0.6800 on RBA-Fed policy divergence, eyes on PBoC rate decision

• AUD/USD trades firmer around 0.6810 in Friday's early Asian session. 
• Fed officials pencilled in more rate cuts by year-end in their latest economic projections. 
• Investors will monitor the PBoC interest rate decision, Fed's Harker speech on Friday.  

The AUD/USD pair trades on a stronger note near 0.6810 during the early Asian session on Friday. The uptick of the pair is bolstered by the softer US Dollar (USD) amid the prospects of further rate cuts by the US Federal Reserve (Fed) this year. Later on Friday, the Fed's Patrick Harker is set to speak. 

The divergence of monetary policy between the Reserve Bank of Australia's (RBA) higher for longer rate narrative and the Fed's easing cycle is likely to influence the major pair in the near term. The two-day Fed meeting ended with an unexpected 50 basis points (bps) rate cut. The new dot-plots suggest a gradual easing cycle, with the 2024 median revised to 4.375% versus the 5.125% projection in June. Market expectations of the Fed rate cut might continue to undermine the Greenback and act as a tailwind for AUD/USD for the time being. 

On the other hand, investors see the RBA keep its Official Cash Rate (OCR) unchanged at the upcoming meeting, but expect the rate cut later this year. Commonwealth Bank of Australia (CBA) analysts moved their expected timing of the first RBA rate cut from November 2024 to December 2024, with 25bp cut expected. "Recent strength in employment growth coupled with still relatively hawkish rhetoric from the RBA Governor means we now see December as the more likely month for the start of normalising the cash rate," said CBA analysts. 

The People's Bank of China's (PBoC) will announce its interest rate decision on Friday. Meanwhile, any development surrounding the weakness in the Chinese economy could weigh on the China-proxy Australian Dollar (AUD) as China is Australia's largest trading partner.