AUD/USD oscillates in a narrow band around 0.6400, reacts little to PBoC’s 10 bps rate cut

• AUD/USD continues with its struggle to gain any meaningful traction on Monday.
• The PBoC’s 10 bps rate cut fails to impress bulls or provide any impetus to the pair.
• Hawkish Fed expectations continue to underpin the USD and contribute to cap gains.

The AUD/USD pair extends its sideways consolidative price action for the second successive day on Monday and seesaws between tepid gains/minor losses, around the 0.6400 mark through the Asian session. Spot prices, meanwhile, react little to the People’s Bank of China (PBoC) rate cut and remain well within the striking distance of the lowest level since November 2022 touched last week.

In fact, China’s central bank lowest the one-year Loan Prime Rate (LPR) by 10 bps, less than the 15 bps expected, to 3.45% from 3.55% previously. Furthermore, the PBoC keeps the five-year LPRs unchanged at 4.20% despite worries about a deepening crisis in China’s property sector. This, along with the concerns about the worsening conditions in the world’s second-largest economy, acts as a headwind for antipodean currencies, including the Australian Dollar (AUD).

Moreover, the disappointing Australian jobs data released last Thursday confirmed another on-hold rate decision by the Reserve Bank of Australia (RBA) in September. Adding to this, the underlying bullish sentiment around the US Dollar (USD) contributes to capping the AUD/USD pair. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, holds steady near its highest level since July 12 amid hawkish Federal Reserve (Fed) expectations.

It is worth recalling that the minutes of the July 25-26 FOMC meeting revealed that policymakers continued to prioritize the battle against inflation and kept the door open for one more 25 bps lift-off by the end of this year. This remains supportive of elevated US Treasury bond yields, which continue to underpin the buck and exerts some pressure on the AUD/USD pair. Traders, however, seem reluctant to place fresh bearish bets ahead of the Jackson Hole Symposium later this week.

Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the downside. Hence, any attempted recovery might still be seen as a selling opportunity and fizzle out rather quickly in the absence of any relevant market moving-economic releases from the US on Monday.

Technical levels to watch