- AUD/USD rises to 0.6635, while US dollar falls amid market optimism.
- US yields fell as the Fed's Austan Goolsbee warns of risks to the labor market if interest rates stay higher for longer.
- The Australian Dollar will be guided by Chinese inflation data for March.
The AUD/USD pair marks a new two-week high at 0.6635 in the early hours of the American session on Tuesday. AUD/USD strengthens as the US dollar extends its bearish trend. The US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, fell to 103.95 even as traders reduced big bets supporting the Federal Reserve (Fed) pivoting to rate cuts starting of the June meeting.
The S&P 500 is expected to open higher, suggesting a cheerful sentiment in the market. Market sentiment could become volatile amid uncertainty ahead of US Consumer Price Index (CPI) data for March, due to be released in March. Monthly headline and core inflation data are expected to have grown at a slower pace of 0.3%, after increasing 0.4% in February. Although price pressures are expected to grow slowly, the pace at which monthly inflation is expected to grow remains higher than the 0.17% needed to reduce inflation to the 2% target.
Fed policymakers have been reiterating the convenience of lowering interest rates now, since they do not trust that inflation will return to a sustainable level of 2%.
The 10-year US Treasury yield fell to 4.39% after Chicago Fed President Austan Goolsbee warned that the unemployment rate could rise if interest rates remain high for too long.
Meanwhile, the Australian Dollar takes advantage of the risk sentiment, but will dance to the Chinese CPI data for March, due out on Thursday. Monthly inflation is expected to have dropped 0.5% after rising 10% in February. The annual CPI would have increased moderately by 0.4%, compared to the previous 0.7%. A decline in inflation data indicates weakness in consumer spending.
As a proxy for China's economic outlook, the Australian Dollar could come under pressure if Chinese CPI data turns out weaker than expected.
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.
