AUDUSD Fundamental Analysis – May-28-2024

AUD/USD—The Australian dollar climbed past $0.665, marking its third consecutive gain. This rise comes as investors brace for upcoming domestic inflation figures, which could significantly impact the interest rate outlook.

AUDUSD Fundamental Analysis – May-28-2024

Australian retail sales in April rose less than expected, highlighting cautious spending behavior among consumers. Despite this, the Aussie dollar continued its upward trajectory, supported by other external factors.

Externally, the Australian dollar benefited from a broad pullback in the US dollar. Additionally, there was strong demand for carry against the Japanese yen, further bolstering the Aussie’s position in the forex market.

Reserve Bank of Australia’s Rate Outlook

Market expectations suggest that the Reserve Bank of Australia (RBA) will keep interest rates high for an extended period. A rate cut is not anticipated until May next year, and the latest RBA meeting minutes revealed that the board had considered raising rates in May but opted to maintain a steady policy. (Source Bloomberg)

Inflation Risks and Future Rate Decisions

The RBA noted that the risk of inflation staying above target for longer has increased. This uncertainty makes it challenging to predict future changes in the cash rate. As data continues to flow, the RBA remains cautious about making immediate moves.

In summary, the Australian dollar’s recent performance reflects a complex interplay of domestic and external economic factors. Forex traders should closely monitor upcoming inflation data and RBA announcements to make informed trading decisions.

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