The Reserve Bank of Australia (RBA) maintains its aggressive policy stance. Even with the slight weakening of the Australian Dollar (AUD), it is still near a seven-month high. Analysts predict potential volatility in the Australian economy due to the RBA’s actions.
The AUD’s stability highlights Australia’s solid fiscal status. Investors hold onto their judgments, watching the currency’s performance for signs of potential risks or gains. The RBA’s upcoming decisions could significantly impact the AUD’s rate against global currencies.
However, despite potential uncertainties, the Australian economy is showing resilience. The RBA’s assertions have boosted confidence in the AUD. The Board’s optimistic view of the economic recovery is warding off notions of a potential recession.
The US Dollar (USD) has depreciated due to expected upcoming rate cuts by the Federal Reserve. A 0.25 percent cut is anticipated next month, causing fears of a slowdown in the US economy.
Australian bank’s policy amid economic uncertainty
However, it could also benefit consumers and small businesses due to lower borrowing costs.
Some investors are responding by moving their assets to safer options like gold. A decrease in the value of USD could benefit export-driven industries by making American goods more competitive internationally. Market participants continue to watch for signals from the Federal Reserve.
According to Patrick Harker, President of the Philadelphia Fed, rate cuts should continue until the end of 2024. This approach is not random but based on significant indicators from various sectors of the economy.
The planned cuts aimed to instigate business investments and consumer spending in response to the COVID-induced economic uncertainty. The San Francisco Fed’s president, Mary Daly, believes in the correct sequencing of rate adjustments to stimulate wage growth and maximize employment.
Australia’s Judo Bank Composite Purchasing Managers Index (PMI) has shown improvement due to significant contributions from the services sector. Increased customer demands, linked to the recent easing of lockdown restrictions, have been significant drivers of activity in the service sector. The growth suggests a rebounding Australian economy.
On a technical front, the AUD/USD pair is around 0.6790. If it surpasses a seven-month resistance level of 0.6798, it could be directed toward the anticipated ascension channel’s upper edge at 0.6910. Whether the price will continue rising or fall back to lower limits is critical for AUD/USD traders.
