AUD/USD Price Forecast: Slumps to near 0.6500 as Fed dovish bets ease

AUD/USD falls sharply to near 0.6500 due to a strong recovery in the US Dollar.

Market expectations for Fed rate cuts in December have slightly eased.

AUD/USD falls back after failing to climb above 38.2% Fibo retracement at 0.6535.

The AUD/USD pair drops sharply to near the psychological support of 0.6500 in the North American trading session on Wednesday. The Aussie pair weakens as the US Dollar (USD) bounces back strongly as traders doubt whether the Federal Reserve (Fed) will cut interest rates again in the December meeting. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds to near 106.60.

The probability of the Fed cutting interest rates by 25 basis points (bps) to 4.25%-4.50% in December has diminished to 56% from 83% a week ago, according to the CME FedWatch tool.

Market speculation for Fed interest rate cuts in December has slightly diminished as investors expect President-elect Donald Trump’s economic agenda will boost United States (US) inflation and economic outlook.

The Australian Dollar (AUD) performs weakly even though the Reserve Bank of Australia (RBA) is expected to keep interest rates unchanged at 4.35% by the year-end. RBA Governor Michelle Bullock maintained hawkish guidance in her remarks in the press conference after the policy decision on November 5, remaining cautioned about upside risks to inflation.