AUDUSD Fundamental Analysis – 11-June-2024

AUD/USD—The Australian dollar recently dipped below $0.66, marking its lowest point in a month. This decline was primarily driven by a robust US dollar buoyed by strong US jobs data.

Robust Jobs Data Lowers Rate Cut Odds

The impressive employment figures have decreased the likelihood of the Federal Reserve implementing two interest rate cuts this year. As a result, investors are adopting a cautious stance ahead of the Federal Reserve’s policy decision, and a critical US inflation report is expected this week.

RBA Unlikely to Ease Policy

On the domestic front, Australia’s economic growth showed signs of slowing. Data from last week indicated that the economy expanded by just 0.1% in the first quarter, down from a 0.3% rise in the previous quarter. This figure also fell short of market expectations, which had predicted a 0.2% increase.

Despite this slowdown, market sentiment suggests that the Reserve Bank of Australia (RBA) will likely not relax its policy stance this year.

RBA Unlikely to Ease Policy

RBA Governor Michele Bullock emphasized the central bank’s readiness to act if inflation persists. However, she also pointed out that the current interest rates and inflation risks are balanced. Bullock highlighted that the labor market shows signs of easing and acknowledged the disappointing GDP growth data.

Summary

The Australian dollar’s depreciation reflects strong US economic performance and domestic economic challenges. Investors and policymakers alike are closely monitoring upcoming US inflation data and Federal Reserve decisions, which could significantly impact global and Australian financial markets.

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