the Australian dollars It finished the second quarter not far from where it started after breaking both sides of the set range. Although some local factors played a role in Australian dollar / US dollar direction U.S. dollar It remains a dominant factor in the currency.
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The Reserve Bank of Australia and the Federal Reserve Bank have their say
The range between 0.6565 and 0.6900 started from February till late May before turning lower on a stronger backdrop American dollar. Early June saw the RBA markets surprise with a 25 basis point rally and AUD/USD rally in the aftermath. Interest rate futures are pricing in two more hikes in the RBA’s year-end cash rate target.
US Federal Reserve Chairman Jerome Powell reaffirmed the bank’s hawkish stance after a pause in the hiking cycle in the past. Federal Open Market Committee (Federal Open Market Committee) meeting in mid-June. The decision not to raise interest rates initially undermined the US dollar, and then strengthened on the back of Powell’s comments. The upcoming meeting of the Federal Reserve in late July may provide some impetus for the next significant move in the Australian dollar.
Commodity prices add to the trade surplus
The fundamental background of the Australian economy remains strong but may not contribute to the appreciation of the exchange rate. The trade surplus continues to contribute significantly to net profit with many Australian commodity exports in global demand.
Chart by Dan McCarthy, created with TradingView
bond spread correlation
Bond spread correlation to AUD/USD is sometimes high, but not always. However, it is definitely worth looking for clues in currency trends.
June also saw the Australian government bond yield reversing into the 3s-10s for the first time since 2008. When this happens, the implication from the bond market is that an economic slowdown is possible at some point beyond that trajectory.
Chart by Dan McCarthy, created with TradingView
Australian CPI may be the key
Heading into the third quarter, the quarterly economic data for Australia will be a major piece of economic data CPI Figures to be released on July 26th. Another hot number that could see the RBA leaning back towards a more aggressive tightening stance. Soft reading might see the opposite. However, the AUD/USD currency pair may see some volatility if the CPI is significantly different from the forecast.
The actions of the Reserve Bank of Australia and the Federal Reserve Bank are likely to be a driving factor for the currency going forward. The problem for the markets, and for the banks themselves, is the uncertainty about the course of the price in the coming months. Both banks have made it clear that upcoming decisions will depend on the data as it is released, making it difficult to predict AUD/USD’s movements.
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