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AUD/USD Weakens on Dovish RBA

The Australian dollar slips as the RBA may continue to reduce the pace of monetary normalisation. The recent bounce has more to do with a pullback in the US dollar rather than a shift in sentiment. The RBA is expected to lift its feet off the pedal with another 25 basis points hike this week. However, as inflation reaches a 32-year high, policymakers are under pressure to stay assertive. The upside risk would be a 50bp hike. Still, the contrast with the US Fed, which might deliver a fourth consecutive 75 bp rate hike in November, could keep the aussie subdued and under 0.6530. A fall below 0.6200 would lead to 0.6000.

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