- AUD/USD fails to maintain its modest initial gains amid some USD buying.
- The Fed's hawkish outlook supports elevated US bond yields and supports the Dollar.
- A slight pullback in equity markets pushes monetary flows further away from the risk-sensitive AUD.
The AUD/USD pair continues its struggle to find acceptance or consolidate its strength beyond the 100-day Ssimple moving average (SMA) and attracts some sellers near the 0.6580 region on Friday. The decline accelerates during the first half of the European session and drags the pair to a new daily low, around the 0.6550 area, amid a modest rally in the US Dollar (USD).
Against the backdrop of persistent geopolitical tensions stemming from conflicts in the Middle East, hopes that central banks around the world will soon cut interest rates are dampening recent optimism. This is reflected in a slight pullback in equity markets, helping the safe-haven USD gain some positive traction and weighing on the risk-sensitive AUD. Furthermore, the Dollar is supported by the hawkish outlook of the Federal Reserve (Fed), which in turn puts some downward pressure on the AUD/USD pair.
Minutes from the late January meeting of the Federal Open Market Committee, released on Wednesday, showed great uncertainty about how long borrowing costs would need to remain at their current level to reduce inflation to the 2% target. by the central bank. Furthermore, comments from a number of influential Fed policymakers suggested that the US central bank is in no rush to cut interest rates. This remains support for elevated US Treasury yields and allows the dollar to further recover from a near three-week low hit on Thursday.
There will be no relevant economic data released in the United States on Friday, so the Dollar will be at the mercy of US bond yields. Apart from this, the broader risk sentiment could boost demand for the Dollar as safe haven and provide some momentum to the AUD/USD pair. However, the pair remains on track to post modest gains for the third consecutive week, although the lack of follow-through buying warrants some caution on the part of the bulls before positioning for additional gains.
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.
