Skip to content AUDUSD Fundamental Analysis – 18-June-2024
AUD/USD—The Australian dollar recently climbed above $0.662, reversing a three-day decline. This change occurred after the Reserve Bank of Australia (RBA) decided to keep the cash rate steady at 4.35% for the fifth consecutive meeting. This decision was anticipated by the market.
The RBA expressed concerns about potential inflationary pressures, pointing to recent Consumer Price Index (CPI) increases, household spending, and service sector inflation.
RBA May Ease Policy After Weak GDP
Despite these inflationary concerns, the market is not expecting another rate hike soon. Instead, there’s a significant 56% chance of a rate cut in December, following weaker-than-expected GDP data from the first quarter. This outlook suggests that the RBA might shift towards a more accommodative monetary policy if economic growth remains sluggish.
Fed Rate Policy Sparks Aussie Dollar Sell-Off
The Australian dollar faced substantial selling pressure recently as the US dollar strengthened. This was due to fears that the Federal Reserve might maintain higher interest rates for longer. Last week, the Federal Reserve kept its policy rate unchanged. Still, it indicated the possibility of only one rate cut this year, a significant shift from the three reductions anticipated in March.
Summary
These developments highlight the delicate balance central banks must strike between controlling inflation and supporting economic growth. Investors should closely monitor these economic indicators and central bank communications to make informed financial decisions.
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