AUD/USD falls beneath 0.6600 amid Reserve Bank of Australia's cautious stance on inflation

Wall Street finished the session mixed, while the Greenback ended on a higher note despite the fall of US Treasury yields.

The main driver for AUD/USD traders was the RBA’s decision to keep the Cash Rate at 4.35%. Their monetary policy statement was tweaked from March, acknowledging that inflation is easing at a slower pace than expected, while March’s statement mentioned that inflation was cooling but remained high. That was perceived as dovish by the markets, who quickly priced in the RBA’s tilting neutral to slightly dovish.

On the US front, the narrative revolves around when the Federal Reserve will cut interest rates. Following the Federal Open Market Committee's (FOMC) decision to hold rates, the US Central Bank mentioned that risks to achieving its dual mandate on employment and inflation “moved toward better balance over the past year,” indicating that sudden weakness in the labor market could open the door to lowering rates.

The lack of data releases keeps traders leaning on speeches by Fed officials. Minneapolis Fed President Neel Kashkari bolstered the Greenback after saying that the Fed might stand put on interest rates and opened the door to raising the federal funds rate if inflation doesn’t resume its downtrend.

In the meantime, the CME FedWatch Tool shows that odds for a quarter-percentage-point cut in September by the Fed increased from 55% last week to 85% as of writing.