AUD/USD tumbles to near 0.6460 as RBA ditches 50 bps rate hike pattern

The AUD/USD pair as the Reserve Bank of Australia (RBA) has hiked its Official Cash Rate (OCR) by 25 basis points (bps). The extent of the rate hike is less than the projections of institutional investors. This has pushed the OCR to 2.6%.

After announcing a rate hike of 25 bps, the RBA has inched more towards its target rate of 3.85%. The market participants favoured hiking the interest rate by 50 bps but a quarter-to-a-percent rate hike was also on the preferred list. RBA Governor Philip Lowe also cited the option of 25 bps in the discussion list, as drafted in RBA monetary policy minutes.

Meanwhile, the US dollar index (DXY) is eyeing more weakness below the immediate cushion of 111.50. The vulnerable performance of the DXY banks upon the poor reading of the US ISM Manufacturing PMI for August. The economic PMI data declined to 50.9 vs. the expectations of 52.2 and the prior release of 52.8. Also, the US ISM New Orders Index that illustrates the forward demand landed significantly lower to 47.1 against the projections of 49.6 and the former figure of 51.3.

Going forward, investors will focus on the US Nonfarm Payrolls (NFP) data, which will release on Friday. The employment generation data is seen lower at 250k vs. the last reading of 315k. As per the consensus, the job creation process in the US economy has slowed down led after various firms ditched the recruitment process for the remaining 2023. While the Unemployment Rate is seen steady at 3.7%.