AUDUSD pair gathers traction and explodes beyond 0.6800.
The AUDUSD pair gathers traction and explodes beyond 0.6800, reaching its highest level since June 20.In the face of a lower US Consumer Price Index (CPI) on Wednesday, the pair remained well supported by some follow-through wide selling in the US Dollar.
The conflicting Chinese data adds to concerns over a possible Chinese economic downturn.
According to the most recent Chinese data, China’s Trade Balance was CNY491.25 billion in June, up from CNY452.33 billion the previous month. Meanwhile, the dollar value of China’s exports fell 12.4% in June, the worst drop in a year. In May, exports declined 9.5% and imports fell 2.6%, compared to 2.3% the previous month.
It should be noted that Australia is a significant resource exporter to China. As a result, investors consider the Australian dollar to be a proxy for the Chinese economy. The recent data has fueled increased fears of a Chinese economic slowdown, which might weigh on the AUDUSD pair.
In terms of the Australian Dollar, RBA Governor Philip Lowe announced a fundamental revamp of the RBA and hinted at more interest rate hikes. Nonetheless, the likelihood of further Fed rate rises remains the primary driver of the AUDUSD.
Aside from that, the US Consumer Price Index (CPI) climbed 0.2% in June, less than the 0.3% expected. The yearly number fell from 4% to 3%, falling short of the market consensus of 3.1% and marking the lowest level since March 2021. The annual core CPI declined from 5.3% in May to 4.8% in June, a 5% decrease from the previous month.
The likelihood that the Federal Reserve (Fed) would stop raising interest rates later this year weighs on the US Dollar.
Meanwhile, markets have priced in a 25-basis point (bps) rate rise at the July Fed meeting. The expectation that the Federal Reserve (Fed) would conclude its tightening cycle later this year weighs on the Greenback and gives some support to the Australian dollar.
Market players will be watching the US Producer Price Index (PPI) and the University of Michigan Preliminary Consumer Sentiment (July) in the coming weeks. These data will have a significant impact on the near-term US Dollar price dynamics and, as a result, will assist define the next move. The AUDUSD pair’s direction.
