AUD/USD Tests Three-Month High Above 0.7200, Market Awaits Fed's Warsh

The Australian dollar extended its gains against the US dollar on Friday, briefly touching a three-month high of 0.7205 and is currently trading around 0.71962. Improved market risk appetite is providing support for the Aussie, but investors remain cautious ahead of Federal Reserve Chair Warsh's speech at Jackson Hole.

**Warsh's Speech Takes Center Stage**

All eyes are on Warsh's upcoming speech, which marks his first appearance as Fed Chair at the Jackson Hole global central bank symposium since taking office in May. The market is looking for clues on the direction of monetary policy, especially against the backdrop of heightened volatility in US Treasury yields recently. However, some market analysts point out that since the Fed is still evaluating multiple policy mechanisms, with results expected around year-end, the likelihood of Warsh delivering a major hawkish surprise is relatively limited. Investors expecting a clear policy roadmap may be disappointed.

**Aussie Benefits from Risk Appetite**

The Australian dollar has strengthened recently, partly benefiting from an overall improvement in risk sentiment. Although the US dollar has stabilized somewhat, supported by strong employment data and hawkish remarks from Fed officials, the Aussie has still posted consecutive gains. The minutes of the Reserve Bank of Australia's August meeting, released earlier, showed policymakers were divided on whether inflation risks warrant another rate hike, but this uncertainty has not significantly weighed on the Aussie.

**Inflation Data in Focus Next**

Beyond Warsh's speech, the market is also awaiting the US Personal Consumption Expenditures (PCE) price index for July, due out next week. As the Fed's preferred inflation gauge, the data will provide important reference for assessing the central bank's next policy moves. Additionally, the US Treasury's recent increase in long-term bond buybacks has led to a slight pullback in long-end yields, but they remain elevated overall, continuing to pressure global borrowing costs and limiting the sustainability of the dollar's rebound.