AUDUSD face significant supply after RBA widely anticipated rate hike.
The AUDUSD pair extends the previous day’s slight drop from the 0.6520-0.6525 zone, or a near three-month high. And attracts substantial selling on Tuesday following the Reserve Bank of Australia’s (RBA) policy announcement. At the end of the November meeting. The Australian central bank lifted the Official Cash Rate (OCR) by 25 basis points to a 12-year high of 4.35%, as expected.
Expectations that this will be the cycle’s final hike put a lot of pressure on the AUDUSD.
The central bank stated in the accompanying monetary policy statement. That whether additional tightening of monetary policy is warranted will depend on the data. And the evolving assessment of risks. Furthermore, the RBA now forecasts inflation to be around 3.5% by the end of 2024. And at the top of the target range of 2 to 3% by the end of 2025. Implying that further rate hikes may be off the table for the time being.
China’s economic troubles, a milder risk tone, and moderate USD strength.
Furthermore, the conflicting Chinese trade balance data. Along with a worse tone in equities markets. Drives flows away from the considered riskier Australian currency. Customs Administration General According to reports, China’s trade surplus decreased substantially in October. From $77.71 billion to $56.53 billion, its lowest amount since May 2022.
The drop was fueled by an unexpected 3% increase in imports and a 6.4% drop in exports, which contributed to fears about deteriorating overseas demand. This indicates that the world’s second-largest economy’s recovery is still uneven, which dampens investors’ desire for risky assets. Aside from that, uncertainty about the Federal Reserve’s (Fed) rate-hike path permits the safe-haven US Dollar (USD) to build on its overnight rally from its lowest level since September 20 and impose further downward pressure on the AUDUSD pair.
US jobs report issued on Friday confirmed market predictions that the Fed will keep interest rates unchanged.
The lower US jobs report issued on Friday confirmed market predictions that the Fed will keep interest rates unchanged. The status quo will be maintained for the third consecutive meeting in December. In addition, Fed Governor Lisa Cook stated on Monday that the central bank’s current target interest rate is sufficient to return inflation to the 2% target.
In contrast, Minneapolis Fed President Neel Kashkari stated that he would prefer overtighten monetary policy than not do enough to bring inflation down to the objective. Kashkari went on to say that the US economy has proven to be quite resilient, and that tightening will not return inflation to 2% in a reasonable time frame. As a result, the attention will remain on talks by other prominent FOMC members.
Meanwhile, a new run lower in US Treasury bond yields may deter USD bulls from making aggressive bets. Limiting losses for the AUDUSD pair. Market investors are now looking ahead to the US economic calendar. Which includes the release of Trade Balance data, which, combined with broader risk sentiment, will fuel USD demand. And create shortterm trading opportunities.
