AUD to USD Forecast: Wage Gains Keep RBA Hawkish, AUD/USD Bullish

Aussie Wage Growth Keeps RBA Rate Hike on Table

On Tuesday, August 13, wage growth figures for Q2 2024 drove buyer demand for the AUD/USD. Wages increased by 4.1% year-on-year in Q2 2024, keeping the same pace as in Q1 2024. Rising wages could boost disposable income and personal spending, possibly fueling demand-driven inflation.

The uptick in wages followed warnings from RBA Governor Michele Bullock about the possibility of a rate hike to tame inflation.

However, Aussie labor market data, due Thursday, August 15, could be pivotal. Tighter labor market conditions could further support wage growth and drive consumer spending. A more hawkish RBA rate path could narrow the interest rate differential between the US and Australia, supporting an AUD/USD move toward $0.70.

Expert Views on Aussie Wage Growth and the RBA

AMP Head of Investment Strategy and Chief Economist Shane Oliver commented on the wage growth report, stating,

“2/3rds of jobs saw a yoy wage rise of 3%+. But qtrly priv wages grth has slowed, priv jobs getting a rise looks to have slowed, Q3 wages will rise less this yr & EBA wage rises look to have peaked. But, wages grth is still high v productivity grth so wil still leave RBA on edge.”

Indeed APAC Senior Economist Callam Pickering remarked,

“Australian wages rose by 4.1% over the past year, slightly outpacing the 3.8% increase in consumer prices. Wage gains are among the highest we’ve experienced in the past 15-years. But it certainly won’t feel that way for most people.”

US Economic Calendar

On Wednesday, the US CPI Report could be pivotal for the Fed rate path and US dollar demand.

Economists forecast the core annual inflation rate to fall from 3.3% year-on-year in June to 3.2% in July.

A lower-than-expected core inflation rate could cement investor bets on multiple 2024 Fed rate cuts. Significantly, softer inflation trends may allow the Fed to redirect its focus to the waning US labor market. Recent US labor market data have fueled fears of a US economic recession. The Fed may consider a more dovish rate path to bolster the US labor market and the economy.

Weaker labor market conditions may affect wages and disposable income, possibly curbing consumer spending. Downward trends in consumer spending could adversely impact the US Economy as private consumption contributes over 60% to GDP.

Weaker inflation and labor market conditions could push the AUD/USD toward $0.70 on expectations of monetary policy divergence.

Expert Views on US Inflation, the Labor Market, and the Fed

Arch Capital Global Chief Economist Parker Ross discussed a likely shift in the Fed’s focus from inflation to the labor market on Tuesday, saying,

“Altogether, if this week’s inflation data is roughly in-line with expectations, the Fed is more likely to be focused on the other side of its mandate (maximum employment) via releases like Thursday’s retail sales, housing data later in the week, and upcoming labor market data.”

Parker Ross suggests that the US jobless claims data, due on Thursday, could impact the Fed rate path more. An unexpected spike in US jobless claims could also retrigger investor fears of a hard US economic landing.

Short-Term Forecast: Bullish

Near-term AUD/USD trends will hinge on the US CPI Report and Thursday’s Australian employment data. Softer US inflation and tighter Australian labor market conditions could signal a narrowing interest rate differential, supporting an AUD/USD move toward $0.70.

Investors should remain alert, with economic data and central bank commentary influencing AUD/USD price trends. Monitor the real-time data, news updates, and expert commentary to adjust your trading strategies.

Stay updated with our latest views and analysis to manage exposures to the forex markets.

AUD/USD Price Action

Daily Chart

The AUD/USD sat above the 50-day and the 200-day EMAs, sending bullish price signals.

A break above the top trend line would support a move toward the $0.67003 resistance level. Furthermore, a breakout from the $0.67003 resistance level could give the bulls a run at the $0.67500 handle.

The US CPI Report and central bank commentary require consideration on Wednesday.

Conversely, a drop below the 50-day and 200-day EMAs could signal a fall toward the $0.65760 support level.

With a 14-period Daily RSI reading of 55.57, the Aussie dollar may rise to the $0.67003 resistance level before entering overbought territory.