- The Australian dollar advances amid market risk appetite sentiment in financial markets.
- The Fed bond gradual reduction announcement is perceived as positive for the US dollar, represented by the AUD / USD pair.
- Fed Chairman Powell: “If we see persistent inflation, we will use our tools.”
The australian dollar It is up for the second day in a row, trading at 0.7489 during the American session at the time of writing. Investor sentiment is positive as US heavy-tech companies will reveal third-quarter earnings, while US Treasury yields fell, while the US dollar will rise.
Despite the broad strength of the US dollar, risk-sensitive currencies such as the AUD, GBP, and NZD are advancing during the day. The US dollar index, which tracks the dollar’s performance against six rivals, is up 0.25%, standing at 93.84.
The AUD / USD pair reached a daily high at 0.7504 but retraced the move towards 0.7475. Investors appear nervous about opening aggressive bets on the pair, as the Fed’s bond phasing announcement is near, perceived as positive for the dollar. On the contrary, despite reducing its bond purchase program, the Reserve Bank of Australia was moderate, saying that it would raise rates until 2024.
Also, more market participants are beginning to bet that the Federal Reserve will make two hikes by 2022, the first in the early second half, while the last at the end of the year. Also, on Friday. Federal Reserve Chairman Powell said high inflation would likely last well into next year, but added that they still expect it to slide back toward its 2% target.
In addition, he added that “if we see persistent inflation, we will use our tools.”
That said, the AUD / USD price action is limited to staying at familiar levels around 0.7400-0.7500, waiting for a new catalyst.
In the next week, the Australian economic agenda will present inflation figures to be published on Wednesday. The latter, together with the advance of US GDP in the third quarter on Thursday, will help determine the trend of the pair. Meanwhile, the direction of the pair will depend on the sentiment of the US dollar, as well as the mood of the market.