Australian Dollar rose due to risk taking following a weaker UoM 5-year inflation expectation on Friday.
On Monday, the Australian Dollar (AUD) extended its gains against the US Dollar (USD) for the second consecutive day, as general market risk appetite increased amid lower forecasts for Federal Reserve interest rate cuts. Meanwhile, investors are looking forward to Wednesday’s Monthly Australian Consumer Price Index release, which will provide insights into the direction of domestic monetary policy.
The Australian dollar could gain ground with the latest Reserve Bank of Australia (RBA) meeting minutes revealed that the board found it difficult to forecast future cash rate changes, noting that recent data raises the risk of inflation remaining above the 2-3% objective for an extended period.
The US dollar fell as the University of Michigan’s 5-year Consumer Inflation Expectations (May) fell to 3.0% from an expected 3.1%.
The US dollar (USD) fell after the University of Michigan released its 5-year Consumer Inflation Expectations for May on Friday. It fell slightly to 3.0%, below the expected 3.1%. Despite an upward revision to 69.1 from a preliminary reading of 67.4, the Consumer Sentiment Index remains at its lowest level in six months. These data are likely to have boosted investor optimism about the Federal Reserve’s prospective rate decreases.
According to the CME FedWatch Tool, the probability that the Federal Reserve will adopt a 25 basis point rate Cuts in September fell to 44.9% from 49.0% a week earlier. It’s worth mentioning that the US market will be closed on Monday for the Memorial Day bank holiday.
Daily Market Movers: The Australian dollar rises due to improving risk sentiment.
The ASX 200 Index climbed beyond 7,770 on Monday, with nearly all sectors recouping losses from the previous week. Australian markets rose in response to Wall Street’s advances on Friday, indicating an increase in risk appetite.
On Friday, the US Census Bureau issued Durable Goods Orders, which showed a robust recovery in April with a 0.7% month-over-month improvement, compared to the expected 0.8% fall. However, the result for March was reduced down to 0.8% from an early estimate of 2.6%.
On Thursday, Australian consumer inflation expectations Future inflation for the next 12 months fell to 4.1% in May, down from 4.6% in April, the lowest level since October 2021.
The S&P Global US Composite PMI rose to 54.4 in May, its highest level since April 2022. The Service PMI jumped to 54.8, signifying the most annual output rise, while the Manufacturing PMI increased to 50.9.
On Thursday, Reuters quoted Chinese state media sources indicating that China had deployed many fighter jets and carried out simulated strikes in the Taiwan Strait and surrounding groups of Taiwan-controlled islands. Any geopolitical tensions in the region may have an influence on the Australian market, given China and Australia are close trading partners.
