Australian dollar rises during periods of risk aversion.
The Australian Dollar (AUD) is trading higher on Monday, regaining its recent losses from the previous session. Despite a higher US Dollar (USD) and rising geopolitical concerns, the AUDUSD pair gains ground.
The Middle East scenario has worsened with the deaths of three US service men in a drone strike on a US base in Jordan.
Overnight on Sunday, three US service members were killed and at least 24 more were injured in A drone attack on a US facility in Jordan, close the Syrian border. According to reports, US President Joe Biden’s administration and the US military are developing detailed measures for responding to the incident, which killed three US personnel. The military is considering possible measures like as strikes into Iran, which would represent a dramatic escalation if undertaken.
The Australian money market remains stable due to rising crude oil prices. The Australian Dollar (AUD) may have also benefited from recent reports indicating extra stimulus measures by the People’s Bank of China (PBoC). According to the Reserve Bank of Australia’s (RBA) Bulletin, businesses have typically expected a reduction in price growth during the last six months, with Prices are expected to continue above the RBA’s inflation goal of 2.0-3.0%.
However, the RBA is expected to reduce borrowing prices later this year. Investors are predicting a 0.7% fall in Australian retail sales on Tuesday, compared to a 2.0% increase the previous day. On Wednesday, we will also look at Consumer Price Index (CPI) data.
The US dollar strengthens as US bond yields rise.
The US Dollar Index (DXY) is upbeat about higher US Treasury bond yields. Which may limit the AUDUSD pair’s gains. On Friday, the US Core Personal Consumption Expenditures Price Index (PCE) for December showed a 0.2% monthly increase, as expected, up from 0.1% in the previous reading. The annual Core PCE increased 2.9%, falling short of the predicted 3.0% and the previous estimate of 3.2%.
The Market Committee’s (FOMC) statement is expected for Wednesday, January 31. With the consensus predicting the Fed Funds rate to remain unchanged at 5.25-5.50%. However, market expectations of a rate drop in March may put negative pressure on the USD. Furthermore, Tuesday’s Housing Price Index and Consumer Confidence numbers will be actively monitored for additional market insights.
Daily Market Movers: Australian Dollar Improves Despite Improved US Dollar.
Australia’s Manufacturing PMI rose from 47.6 to 50.3, indicating an improvement. Services PMI increased from 47.1 to 47.9. The Composite PMI increased to 48.1, up from 46.9 in December.
Chinese financial media stated that the People’s Bank of China (PBoC) may reduce the Medium term Lending Facility (MLF) rate in the Current quarter. The announcement follows PBoC Governor Pan Gongsheng’s recent statement. Which disclosed that the Bank would decrease the Required Reserve Ratio (RRR) by 50 basis points beginning February 5th.
US Treasury Secretary Janet Louise Yellen stated. That the US economy’s healthy performance in the fourth quarter is viewed positively and is unlikely to generate inflationary concerns.
The US Gross Domestic Product Annualized (Q4) reading was 3.3%. Compared to 4.9% the previous quarter, beating the market consensus of 2.0%.
US first jobless claims for the week ending January 19 fell. Unexpectedly to 214K, compared to an expected increase of 200K from 189K the previous week.
