Australian dollar rises, presumably due to improving risk sentiment amid de escalated tensions in the Middle East.

On Tuesday, the Australian Dollar (AUD) rose for the second day in a row, boosted by a stronger risk appetite. This favorable feeling comes as geopolitical tensions in the Middle East have eased, as seen by an Iranian official’s statement last week, which suggested no immediate plans for retribution against Israeli bombings, according to Reuters.

The Australian dollar gets a tiny bump after the announcement of Australia’s Judo Bank released its Purchasing Managers Index (PMI) statistics on Tuesday. The Composite PMI reached a 24-month high of 53.6 in April, up from 53.3 the previous month. This indicates a rapid expansion in the Australian private sector during the second quarter, with strong growth driven by the services sector.

The US dollar remains restrained in response to lower US Treasury yields.

The US Dollar Index (DXY), which compares the US Dollar (USD) to six major currencies, is under pressure due to a small drop in US Treasury yields. According to the CME FedWatch Tool, the likelihood of the Federal Reserve (Fed) keeping interest rates steady at its June meeting has increased to 84.4%, up from 78.7% the previous week. Additionally, comments from Federal Reserve officials imply a more hawkish view about the trajectory of interest rates of 84.5

The CME FedWatch Tool shows an increase over the previous week’s 78.7%. Furthermore, comments from Federal Reserve officials indicate a more hawkish perspective on the path of interest rates in June.

On Tuesday, investors are anticipated to closely scrutinize the US S&P Global Purchasing Managers Index (PMI). Market opinion predicts gains in both the manufacturing and service sectors in April. On Wednesday, the focus will move to the Australian Monthly Consumer Price Index and the quarterly RBA Trimmed Mean CPI figures.

Daily Market Movers: Australian Dollar Holds Ground Following PMI Data.

In April Australia’s Judo Bank Manufacturing PMI rose to an eight-month high of 49.9, compared to 47.3 in March. However, the Services PMI has dropped to a two-month low of 54.2, down from the ANZ reported reductions in both the economic and financial subindices. Renters’ confidence declined significantly, as did that of other housing cohorts.

China Securities Journal reported that the People’s Bank of China (PBoC) may drop the Medium-term Lending Facility (MLF) rate.

On Tuesday, the China Securities Journal reported that the People’s Bank of China (PBoC) may drop the Medium-term Lending Facility (MLF) rate on May 15 to reduce funding costs. Given China and Australia’s strong trading ties, such a move could have an impact on the Australian economy.
The People’s Bank of China kept its Loan Prime Rate (LPR) at 3.45% on Monday. The LPR is an important benchmark rate for Chinese banks for establishing interest rates for loans made to its customers. Given the strong economic linkages between China and Australia, any changes in Chinese monetary policy have the potential to affect the Australian market.
China’s Ministry of Commerce has put a new tariff on US imports. China has placed a 43.5% levy on imports of propionic acid from the United States. This molecule is widely used in a variety of industries, including food, feed, insecticides, and medical purposes, according to Reuters.
According to Bloomberg, Chicago Fed President Austan Goolsbee stated on Friday that progress on inflation had “stalled,” and that the Federal Reserve’s current restrictive monetary policy was reasonable. Meanwhile, Reuters claimed that Atlanta Fed President Raphael Bostic stated that the US central bank will not reduce interest rates until the end of the year.