The AUD/USD pair struggles to capitalize on the previous day’s goodish rebound from the 0.7030-0.7025 region, or over a one-week low, and meets with fresh supply on Friday. Spot prices, for now, seem to have snapped a two-day winning streak and trade just above mid-0.7000s during the early European session, down 0.25% for the day amid a modest US Dollar (USD) strength.
The USD bulls, however, lack conviction amid dovish Federal Reserve (Fed) expectations. In fact, Chicago Fed Austan Goolsbee said on Tuesday that there are potentially several more interest rate cuts this year if inflation resumes a decline to the 2% target. This comes on top of softer US consumer inflation figures released last Friday, which backs the case for further policy easing by the Fed and acts as a headwind for the buck.
Meanwhile, signs of progress in US-Iran nuclear talks ease concerns about a direct military confrontation and remain supportive of a positive tone around the equity markets. This further contributes to capping the upside for the safe-haven Greenback and should offer some support to the risk-sensitive Aussie. Apart from this, the Reserve Bank of Australia’s (RBA) hawkish outlook could limit the downside for the AUD/USD pair.
The RBA raised the Official Cash Rate (OCR) for the first time in more than two years earlier this month and judged the labour market to be tight. The central bank also revised up its forecast for the economy to expand by 2.1% by June this year and expects inflation to be higher in 2026, leaving the door open for more rate hikes. This marks a significant divergence in comparison to the dovish Fed and warrants caution for the AUD/USD bears.
Investors might also refrain from placing aggressive directional bets and opt to wait for more cues about the Fed’s rate-cut path. Hence, the focus will remain glued to the FOMC Minutes, due later today, and Friday’s release of the US Personal Consumption Expenditure (PCE) Price Index. Apart from this, the monthly Australian employment details should provide a fresh impetus to the AUD/USD pair during the latter part of the week.
Economic Indicator
Unemployment Rate s.a.
The Unemployment Rate, released by the Australian Bureau of Statistics, is the number of unemployed workers divided by the total civilian labor force, expressed as a percentage. If the rate increases, it indicates a lack of expansion within the Australian labor market and a weakness within the Australian economy. A decrease in the figure is seen as bullish for the Australian Dollar (AUD), while an increase is seen as bearish.
