The AUD/USD pair saw renewed buying interest during the early European session, climbing towards the recent two-and-a-half-week high it reached last Friday. The pair is currently trading around the 0.6600 level, with bullish traders eyeing a push beyond the critical 200-day Simple Moving Average (SMA).
The Australian Dollar (AUD) continues to be supported by the Reserve Bank of Australia‘s (RBA) firm stance on combating persistent inflation. Last week, RBA Governor Michele Bullock reiterated the central bank’s commitment to vigilance against inflation risks and signaled readiness to raise interest rates further if necessary. This hawkish outlook, coupled with a generally positive sentiment in equity markets, has strengthened the risk-sensitive AUD.
Conversely, the US Dollar (USD) is struggling to find solid ground amid growing expectations of more substantial interest rate cuts by the Federal Reserve (Fed). This weakness in the USD has provided an additional lift to the AUD/USD pair. However, lingering concerns about a global economic slowdown, particularly with Australia’s economic ties to China, might limit aggressive bullish bets on the Australian Dollar. Moreover, traders may adopt a cautious approach ahead of key US inflation data scheduled for this week.
Market participants are closely watching the upcoming release of the US Producer Price Index (PPI) on Tuesday, followed by the Consumer Price Index (CPI) on Wednesday. Additionally, the US economic calendar will feature monthly Retail Sales figures. These critical data points are expected to influence market expectations regarding the Fed’s future monetary policy decisions, which will, in turn, affect USD demand and set the direction for the AUD/USD pair. For now, the underlying fundamentals appear to favor the Aussie Dollar, supporting the potential for further gains.
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