Australian Dollar rises sharply on RBA's hawkishness, USD weakness

• AUD/USD surges higher amidst positive Australian economic data.
• Monetary policy divergence continues to favor the Aussie.
• Focus shifts to US PCE data, which may influence market expectations for Fed rate cuts in November.

The AUD/USD pair surged higher on Thursday, rising by 0.90% to 0.6890. The Australian Dollar strengthened after the release of positive economic data and the hawkish stance of the Reserve Bank of Australia (RBA) this week. Meanwhile, the US Dollar weakened as markets are hopping for a larger cut by the Federal Reserve (Fed) in November.

Amidst a multifaceted economic landscape in Australia, the Reserve Bank of Australia's (RBA) assertive stance on inflation has led markets to anticipate a modest reduction in interest rates by only 0.25% in 2024.

Daily digest market movers: Australian Dollar rises sharply on RBA's rate hold

• The Aussie advanced significantly against the US Dollar after the RBA kept its interest rates unchanged at 4.35%, but maintained a hawkish message.
• In fact, RBA Governor Michelle Bullock stated that the bank isn't considering rate cuts.
• Market participants anticipate that the Fed may implement another 50 basis point (bps) interest rate cut in November, following its initial 50 bps reduction to 4.75%-5.00% last week.
• Investors are closely watching the upcoming release of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for August.
• The core PCE inflation data, which is the Fed's preferred inflation gauge, is expected to increase from 2.6% in July to 2.7%.
• A sustained increase in inflation could reinforce expectations for the Fed to reduce interest rates by 50 bps in November, while a stronger-than-expected reading may dampen those expectations.

AUD/USD technical outlook: Aussie regains momentum after Wednesday's decline

After a decline to around 0.6800, the AUD/USD pair gained momentum, rising to near 0.6900. Indicators including the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators suggest a steady bullish momentum and the pair may be set to retest the area above 0.6900.

If the Aussie resumens its downside it might retest the 0.6800 area which proved to be a strong support. Below, 0.6750 and 0.6730 line up.