- The US dollar is strengthened by the relaxation of commercial tensions between the US and China and an NFP report better than expected.
- Non -agricultural payroll show that 139,000 jobs were added to the US economy in May, above the estimate of 130,000.
- The AUD/USD falls after a temporary psychological resistance test, which remains intact at 0.6500
The Australian dollar (AUD) is weakening against the US dollar (USD) after the report of non -agricultural payroll (NFP) on Friday that delayed the expectations of a short -term interest rate cut by the Federal Reserve (Fed).
At the time of writing, the AUD/USD is being negotiated below 0.6500, a psychological level that continues to provide a firm resistance barrier for price action.
The USD is recovered after NFP data better than expected that they relieve the pressure on the Fed
After a series of employment data publications in the US that warned about a cooling in the US labor market, the May NFP report provided a break to investors and policy responsible.
The report showed that 139,000 jobs were added to the US economy last month, above the expectations of 130,000 analysts. The unemployment rate remained unchanged in 4.2%, offering relief to the Federal Reserve, which has continued to reiterate a position dependent on the data in monetary policy.
Before the publication of the employment data on Friday, the CME Fedwatch tool showed that the probability of a rate cut in July had increased above 30%. However, after the publication, the expectations of a rate cut in July decreased to 16%, reinforcing a possible rate cut in September.
For the Aud/USD, the differentials of interest rates and the divergence in monetary policy continue to be the main drivers of the price action. While the Australian Reserve Bank (RBA) maintains a cautious tone with respect to future fees movements, the continuous fed hard line posture can keep the US dollar backed in the short term.
Meanwhile, the relaxation of tensions between the US and China, after a phone call between US president Donald Trump and Chinese president Xi Jinping on Thursday, has improved the feeling. However, uncertainty about ongoing tariffs and commercial tensions with other important partners such as India, Canada and Mexico could still increase market volatility.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
