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Title: AUD/USD stays mildly offered near 0.6700 amid hawkish Fed bets, China concerns

September 19, 2022 01:38 AM ET

By: AnalysisWatch

The AUD/USD pair is retreating back to the 28-month low hit the previous day, holding at a lower level near the 0.6700 mark ahead of Monday's European session. In doing so, the Aussie pair justified the bearish sentiment in a gloomy session.

Moving up the indices, headlines about Australia's largest customer, China, and fears of an aggressive U.S. Federal Reserve (Fed), are getting attention. It is worth noting that mixed comments from Reserve Bank of Australia head Jonathan Kearns also appear to have put downward pressure on the risk barometer pair.

In addition, comments from China's state planner, the National Development and Reform Commission (NDRC), act as an additional negative catalyst for AUD/USD prices. Despite positive changes in key economic indicators, the fundamentals of the domestic economic recovery remain weak, according to China's NDRC.

Of note, the People's Bank of China (PBOC) reduced the 14-day repo rate by 10 basis points (bps) to 2.15%. Reuters reported that with no repo maturing on Monday, China's central bank is injecting 12 billion yuan on the day. This could have indicated that the dragon nation is not in recovery mode and needs more rate cuts than rate hikes, which could have favored sellers of the Aussie pair.

It is worth noting that the probability of a 75 basis point (bp) Fed rate hike has risen to 82%, while market expectations for a full percentage Fed rate hike have risen to 18% at the latest.

Looking ahead, a light calendar and no change in the UK could limit AUD/USD movements. However, risk aversion and anxiety ahead of the Fed could keep the pair on the defensive. Also important are the RBA minutes, comments from RBA policymaker Guy Bullock, and the preliminary results of the September Australian PMIs.

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