Australian dollar remains stable at a psychological level as it awaits the release of the Australian budget.

The Australian Dollar (AUD) fell more on Monday, presumably due to the Reserve Bank of Australia’s (RBA) less hawkish posture following its decision to maintain interest rates unchanged at 4.35% on Tuesday. Markets were betting that the RBA might take a more hawkish approach, prompted by last week’s inflation data, which beat expectations.

Australia’s Treasury announced that inflation could return to the RBA target range by the end of 2024.

On Sunday, Australia’s Treasury indicated that they expected inflation to re-enter the The Reserve Bank of Australia’s (RBA) goal range for the end of 2024. In their December forecast, officials expected that CPI inflation would fall to 3.75% by mid-2024 and 2.75% by mid-2025, which is consistent with the RBA’s goal range.

The US Dollar benefited from Fed members’ cautious statements about interest rate decreases.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) versus six major currencies, continues to rise as traders absorb Friday’s crucial economic data and cautious remarks from Federal Reserve (Fed) officials on interest rate cuts. However, a downward correction in US Treasury yields may limit the Greenback’s gain.

In the United States (US), investors are preparing to focus on key economic figures that could serve as big market drivers this week. Key highlights include the Producer Price Index. (PPI) is planned for release on Tuesday, followed by the Consumer Price Index (CPI) and Retail Sales figures on Wednesday.

Daily Market Movers: The Australian dollar falls due to a dovish RBA.

In April, National Australia Bank’s Business Conditions decreased to 7, down from 9. Meanwhile, National Australia Bank’s Business Confidence stood at 1.
According to The Guardian, Australia’s Treasurer Jim Chalmers hinted to encouraging prospects during a series of television interviews on Sunday morning. Chalmers predicted that the forthcoming budget will show a faster drop in inflation than the RBA had expected. He highlighted that Tuesday’s budget aims to reduce rather than increase inflation, while also easing some of the responsibilities on individuals.
China’s In April, the Consumer Price Index (CPI) increased by 0.3% year on year, up from 0.1% in March. This increase correlates with a moderate revival in domestic demand, albeit the overall economic recovery remains shaky. Meanwhile, the Producer Price Index (PPI) fell 2.5%, marking the 19th consecutive month of deflation. Given China and Australia’s tight commercial links, these data have the potential to influence the Australian market.
According to Reuters, Neel Kashkari, President of the Minneapolis Federal Reserve (Fed), expressed concern about the amount of restrictive monetary policy. In an interview with CNBC on Friday, Kashkari noted that while another rate hike is unlikely, it is not completely out of the question. Additionally, the San Francisco Fed President Mary Daly stressed the importance of maintaining a long-term restrictive policy to meet the Federal Reserve’s inflation targets.

University of Michigan Consumer Sentiment Index fell to 67.4 in May from 77.2 in April.

On Friday, the University of Michigan Consumer Sentiment Index fell to 67.4 in May from 77.2 in April, a six-month low and below market forecasts of 76. Meanwhile, the UoM 5-year Consumer Inflation Expectation increased to 3.1%, a six-month high, from 3.0% previously.
The Commonwealth Bank of Australia (CBA) has reduced its projection for the Australian dollar at the end of 2024 to 0.69, down from 0.71 before. CBA cites issues such as the interest rate gap and rising US Treasury bond yields as reasons for the US dollar’s strength. The Federal Reserve’s cautious approach against high inflation and unwillingness to Implement rate reduction to further support the US Dollar, as reported by forexlive.com.