AUDUSD gets significant upward traction, aided by a steep drop in the USD.
The AUDUSD pair gets intense bids on the opening day of a new week and maintains its strong intraday gains. Nearing a multi-day high in the first part of the European session. Spot prices are now trading just below the mid-0.6400s, up about 1% on the day. And are supported by a strong drop in the US Dollar (USD).
Hawkish BoJ-inspired JPY surge weighs on the USD as traders await the important US CPI.
The hawkish Bank of Japan (BoJ)-inspired sharp increase. The rise in the Japanese yen (JPY) is dragging the USD Index (DXY). Which measures the Greenback against a basket of currencies, like away from a six-month high reached on Friday. The USD’s decline might also be linked to some trade repositioning. Ahead of this week’s key US macro data, notably the latest consumer inflation readings on Wednesday.
The important US CPI report will play an important role in determining market expectations regarding the Federal Reserve’s (Fed) future rate rise path. Which will fuel USD demand and offer a new directional push to the AUDUSD pair. Meanwhile, the expectation of future Fed policy tightening could help restrict the buck’s downside. And limit any further gains for the major.
AUDUSD Bulls may be hesitant to place aggressive wagers on the pair due to China’s economic difficulties.
In reality, AUDUSD Market players are persuaded that the US central bank will maintain its hawkish approach and have priced in the probability of another 25 basis point hike before the end of the year. Furthermore, positive US macro data provided last week indicated a strong economy, allowing the Fed to maintain interest rates higher for longer. This continues to sustain rising US Treasury bond rates.
The aforementioned underlying background benefits USD bulls. While a generally upbeat tone in equities markets benefits the risk-sensitive Australian dollar. Investors applauded the better-than-expected China inflation statistics released over the weekend. Which revealed that consumer price inflation returned to positive territory in August. Raising expectations that the economy is stabilizing. However, concerns about the worsening prospects in the world’s second-largest economy, as well as headwinds from fast rising borrowing prices, should limit market confidence. As a result, it is important to wait for substantial follow-through purchasing before confirming that the AUDUSD pair has established a near-term bottom and preparing for any future upward movement.
