Australian Dollar recovers recent losses amid rising odds of a bumper Fed interest rate

• The Australian Dollar received downward pressure from concerns over glooming China’s economy.
• The Aussie Dollar’s downside could be restrained due to hawkish sentiment surrounding the Reserve Bank of Australia’s policy outlook.
• The US Dollar struggles due to rising odds of an aggressive Federal Reserve interest rate cut on Wednesday.

The Australian Dollar (AUD) recovers its intraday losses against the US Dollar (USD) on Tuesday following dovish sentiment surrounding the US Federal Reserve interest rate decision. However, the Aussie Dollar faced challenges due to growing concerns over the health of China’s economy. Analysts point out that the latest round of weak economic data indicates serious challenges for the world’s second-largest economy. Since China is a key trading partner for Australia, fluctuations in China’s economic health can have a significant effect on the Australian market.

Economists at Goldman Sachs and Citi have reduced their 2024 GDP growth forecasts for China to 4.7%, falling short of Beijing’s target of around 5.0%. SocGen describes the situation as a “downward spiral,” while Barclays calls it “from bad to worse” and a “vicious cycle.” Morgan Stanley also cautions that “things could get worse before they get better,” according to a Reuters report.