On Wednesday, the Australian dollar gains lead against its counterpart, the greenback. AUD/USD increased by 0.22% to 0.7621.
Good recovery from previous session
The AUD/USD pair showed a good recovery from its previous session plunge greatly affected by the RBA monetary policy decision. The pair underwent intense selling tension as the RBA maintained its monetary policy standpoint.
“While no one expected a change in the cash rate, the market was clearly priming itself for more something that could be inferred as at least having a partly hawkish tilt,” David de Garis, economist at the National Australia Bank, stated.
A huge number of investors are looking forward that the RBA would assume a more hawkish standpoint, the same as its counterparts in Canada and Europe.
The US dollar dodge pressure last week since it is expected that Europe and Canada central banks are all set to join the Fed tightening monetary policy.
Upbeat U.S. Economic Data
The dollar index rebound from a nine-month low on Friday and experts attribute the rise in the dollar due to a direct demand for the USD and not due to the weakening of the other currencies.
Ahead of the Independence Day commemoration, the greenback rocketed because of the upbeat U.S. economic data and the rising U.S. bond yields.
However, the U.S. dollar index (a measure of the greenback’s strength against the six major currencies) was firm at 95.94.
China Caixin Services PMI
It is surprising that traders treated lightly the drop of the China Caixin Services PMI from 52.8 in May to 51.6 in June. The focus of the investors is glued to the minutes of the meeting of the Federal Open Market Committee (FOMC) as it will help them determine their succeeding directional move.
Despite the data, the AUD made some gains amid a mixed picture of Chinese activity. In general, a PMI reading of above 50 suggests expansion, such as the result back in June.
By and large, the relationship of Australia and China is being embodied by strong trade bonds. The Asian superpower is the country’s biggest trading partner and any changes in each economy can have a great impact to the other.
AUD vs. Other Currencies
The Aussie traded at 86.35 versus the Japanese Yen. It is also important to note that 1 AUD is equivalent to 0.67 Euro. For the AUD/GBP and AUD/NZD, it is 0.59 British Pound and 1.05 New Zealand dollars, respectively.
The recent North Korea missile test and the increased tensions also put the Aussie in distress.
The Aussie is affected by sentiments, geopolitics and technical such as U.S. bond yields, Chinese market status and the U.S. dollar movements. Investors must be vigilant for any new forecasts from the Fed.
Furthermore, the Reserve Bank of Australia (RBA) interest rate pronouncement is possible to drag the AUD/USD downwards. However, it might also possible that in the second half of the year, the RBA may have a change of heart and adopt a hawkish policy statement. When this happens, it can be the start of a bullish Aussie that investors have been waiting for.
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