Australian dollar edged higher on improved market optimism amid muted US dollar.
On Wednesday, the Australian Dollar (AUD) reversed its three-day slide, returning to levels last seen in mid-November. Nonetheless, hawkish words from Federal Reserve (Fed) officials, as well as an influx of safe-haven flows, may strengthen. The US Dollar (USD) and limit AUDUSD’s upside in the medium term.
The Australian dollar gains momentum as the ASX 200 Index recovers from three days of losses. However, AUD faced challenges, presumably because to risk aversion.
Investors were cautiously awaiting Israel’s response to Iran’s air strike on Saturday. According to Reuters, Israel’s defense cabinet’s third meeting. Set for Tuesday to decide how to respond to Iran’s unprecedented direct attack, has been postponed until Wednesday. Meanwhile, Western partners are considering imposing further restrictions on Tehran to deter Israel from escalating the situation further.
The US Dollar Index (DXY) remains close to its five-month high of 106.51.
The US Dollar Index (DXY) has retreated from its five-month high of 106.51 set on Tuesday. This fall could be linked to a small decrease in US Treasury yields. Fed Chairman Jerome Powell’s words on Tuesday. Indicating that recent data indicates little progress on inflation this year and gthat it will take longer than expected to meet the 2% target, may have contributed. to a hawkish position and gave some support for the US dollar.
Daily Market Movers: Australian Dollar recovers losses due to improving sentiment.
The Westpac Leading Index fell 0.1% month on month in March, after rising 0.8% in February.
The Australian Employment Change and Unemployment Rate for March are set to be revealed on Thursday.
In the first quarter of 2024, China’s GDP increased by 1.6% quarter on quarter, compared to a 1.0% increase in the previous quarter. GDP increased by 5.3% year on year, topping previous expectations of 5.0% and 5.2%.
China’s industrial production (YoY) grew by 4.5% in March, compared to market expectations of 5.4% and 7.0%, respectively.
US National Security Advisor Jake Sullivan announced new sanctions targeting Iran.
Late on Tuesday, US National Security Advisor Jake Sullivan announced new sanctions targeting Iran, as well as sanctions against businesses Support for the Islamic Revolutionary Guard Corps and the Iranian Defense Ministry will be implemented in the following days.
President Mary Daly of the Federal Reserve Bank of San Francisco has underlined that, while great progress has been made in terms of inflation, more work remains to be done. She emphasized the importance of ensuring that inflation is on track to meet the target before making any moves.
According to the CME FedWatch Tool, the likelihood of interest rates being steady at the June meeting has increased from 78.7% on Monday to 84.8%.
In March, US building permits (MoM) decreased to 1.458 million, compared to expectations of 1.514 million and 1.523 million the previous month. Housing starts fell to 1.321 million MoM from 1.549 million, missing the forecast 1.480 million.
US Retail Sales (MoM) rose 0.7% in March, beating market estimates of 0.3%. The previous reading was corrected to 0.9%, up from 0.6% in February.
