**Rewritten and Expanded Article: AUD/USD Weekly Outlook — RBA Rate Cut Bets Weigh on the Australian Dollar**
*Original reporting by Kathy Lien, rewritten and expanded*
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### Overview
The Australian dollar (AUD) has faced persistent downward pressure against the US dollar (USD) in recent sessions, with market sentiment dominated by shifting expectations regarding the Reserve Bank of Australia’s (RBA) monetary policy. Renewed bets on rate cuts by the RBA, coupled with ongoing strength in the greenback, have left the AUD/USD exchange rate close to multi-month lows. This outlook delves into recent developments impacting the pair, key economic data, and projections for the weeks ahead.
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### Recent Performance and Market Context
Over the past week, the AUD/USD pair slid toward the lower end of its recent trading range. The decline began amid broader risk aversion globally and accelerated as RBA rate cut expectations intensified. Global conditions—especially data and expectations from the United States—continue to play a pivotal role. The US dollar remains resilient due to the Federal Reserve’s cautious approach on rate reductions.
**Key drivers behind recent AUD/USD weakness:**
– Increased speculation that the RBA will cut its cash rate by the end of 2024.
– Persistent strength in the US labor market and service sector bolstered the broader USD.
– Disappointing Australian economic data.
– Asian market risk aversion amid concerns over China’s recovery and global growth.
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### RBA Policy Stance and Its Impact
Early in the year, the RBA attempted to communicate its commitment to keeping rates higher for longer to curb inflation. However, recent economic data have challenged that narrative, giving investors a renewed reason to price in rate cuts.
**Factors contributing to dovish RBA expectations:**
– Australia’s Q1 GDP growth came in at just 0.1% q/q, falling short of consensus estimates and highlighting slack in the domestic economy.
– According to the latest RBA Statement on Monetary Policy, inflation is expected to slow further, edging toward the central bank’s 2-3% target range by late 2025.
– Signs of cooling in the labor market, with rising unemployment and a softening hiring outlook.
– Retail sales remain subdued, indicating persistent consumer weakness due to cost-of-living pressures.
**Market sentiment shifts:**
– After the GDP disappointment, money markets priced in at least one 25 basis point cut from the RBA by year-end.
– The likelihood of an additional cut in early 2025 has increased, especially if inflation drops as forecasted.
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### Comparative Outlook: RBA vs. Federal Reserve
The divergence in policy expectations between the RBA and the Federal Reserve continues to be a central theme for AUD/USD.
**Reserve Bank of Australia:**
– Main cash rate stands at 4.35 percent, unchanged since November 2023.
– Minutes from the May meeting signaled a cautious approach, but the central bank is open
Read more on AUD/USD trading.