Federal Reserve Chair Jerome Powell's clear message about prioritising inflation-fighting over maintaining healthy economic growth should spur ongoing demand for the U.S. dollar, while risk currencies such as the AUD will be particularly vulnerable nL1N30226Z.
The Fed chief did not mention 'soft landing' in his Jackson Hole speech on Friday and instead warned of pain for businesses and households nL1N30219A.
Other central bankers attending the symposium echoed Powell.
Reuters reported that some European Central Bank members want to discuss the possibility of a 75 basis-point hike at their September meeting, while the head of the Bank of Korea indicated they will be hiking rates after the end of the Fed's tightening cycle nL4N3014BBnL1N30500R.
If central banks refuse to blink in their battle against inflation, the global growth outlook will deteriorate in the short to medium term.
This would likely result in equity and commodity market weakness that will pressure the Australian dollar.
The AUD/USD edged below support at the 61.8 Fibonacci retracement of the 0.6682-0.7136 rally at 0.6855 this morning.
A clear and sustained break below 0.6850 targets the year's low at 0.6682 and that may be just the start of a deeper fall.
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