The AUD/USD currency pair is trading within a narrow range just below the 0.6900 mark during the early European session on Friday, maintaining proximity to its highest level since February 2023, reached earlier this week.
The US Dollar (USD) has attracted some buying interest ahead of the release of the US Personal Consumption Expenditure (PCE) Price Index, creating a headwind for the AUD/USD pair. However, expectations for a significant interest rate cut by the Federal Reserve (Fed) in November have tempered aggressive buying of the USD. Additionally, a positive market sentiment has limited gains for the safe-haven dollar, offering some support to the risk-sensitive Australian Dollar (AUD).
This global risk appetite was further bolstered by the People’s Bank of China‘s (PBOC) decision to reduce the seven-day repo rate from 1.7% to 1.5% and lower the Reserve Requirement Ratio (RRR) by 50 basis points. These moves, part of a broader set of stimulus measures introduced this week, have ignited a risk-on rally in global equity markets, strengthening the China-proxy AUD amid the Reserve Bank of Australia‘s (RBA) hawkish position.
Indeed, the Australian central bank reiterated on Tuesday its commitment to a restrictive policy until there is sustainable confidence that inflation is moving toward the target range. RBA Governor Michele Bullock emphasized that recent economic data has not significantly altered the policy outlook, suggesting that the AUD/USD pair is likely to trend upward and extend its rally, which has been ongoing for over two weeks.
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