Skip to content AUDUSD Fundamental Analysis – 30-August-2024
The Australian dollar has been hovering close to its highest levels of the year, around $0.680 (AUD/USD). This strong performance will result in a nearly 4% monthly gain.
The primary reason behind this strength is the ongoing high inflation in Australia. This has led to expectations that the Reserve Bank of Australia (RBA) will maintain a tough stance on monetary policy.
US Dollar Weakness Bolsters the Aussie
In addition to domestic factors, the Australian dollar has also been supported by a broad weakening of the US dollar. The Federal Reserve in the United States is anticipated to cut interest rates as early as September due to lower inflation and increasing concerns about the US labor market.
This potential shift in US monetary policy has made the Australian dollar more attractive to investors.
Australian Inflation Slows, But Still a Concern
Recent data showed that Australia’s Consumer Price Index (CPI) increased by 3.5% in the year leading up to July. Although this was a slight slowdown from the 3.8% rise recorded in June, it still surpassed expectations at 3.4%. This persistent inflation keeps the RBA on alert as they monitor economic conditions closely.
RBA’s Tough Decision on Interest Rates
The minutes from the RBA’s most recent meeting revealed that the members seriously discussed raising interest rates to combat inflation. However, they ultimately decided to hold the rates steady.
RBA Governor Michelle Bullock recently emphasized that despite some signs that inflation might be easing, it’s still too early to consider lowering interest rates. This cautious approach reflects the RBA’s commitment to keeping inflation under control.
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