- AUD/USD is approaching 0.6700 while the US Dollar is under pressure.
- Soft US inflation in May has boosted hopes of a Fed rate cut.
- The RBA could tighten monetary policy further as price pressures accelerated in May.
The AUD/USD pair is advancing towards the round-level resistance of 0.6700 in the European session on Monday. The pair is gaining ground as the US Dollar (USD) is facing strong selling pressure amid firm speculation that the Federal Reserve (Fed) will start lowering interest rates from the September meeting.
Expectations for Fed rate cuts have been boosted by an expected slowdown in price pressures. The U.S. Personal Consumption Expenditures (PCE) report for May showed the annual measure of core inflation decelerated to 2.6% from 2.8% in the previous release.
A decline in US inflation pressures has raised expectations of early rate cuts by the Fed. The CME FedWatch tool shows the central bank will begin reducing its key interest rates starting with the September meeting .
For more clues on interest rates, investors await US labor market and PMI data for June, which are scheduled for this week.
In Monday’s session, investors will focus on the US ISM manufacturing PMI data, due out at 14:00 GMT. The manufacturing PMI is estimated to have improved to 49.0 from May’s reading of 48.7. However, a reading below the 50.0 threshold is itself considered a contraction in factory activities.
On the Australian front, the main triggers for the Australian Dollar this week are the Reserve Bank of Australia (RBA) minutes and monthly retail sales for May. The RBA minutes will provide further clues as to whether the central bank will raise interest rates further.
The recent increase in price pressures in Australia has strengthened the likelihood of further policy tightening by the RBA. The annual monthly Consumer Price Index (CPI) rose at a faster pace of 4.0% in May than estimates of 3.85 and the previous release of 3.6%.
economic indicator
RBA meeting minutes
The report on the meeting of the committee of the Reserve Bank of Australia It is published two weeks after the interest rate decision. These minutes contain what was discussed at the meeting, including the different points of view, expectations, discussions and votes for the monetary policy decided. A positive outlook on the economy shows a possible rise in interest rates which means upward pressure on the Australian dollar, on the contrary a pessimistic outlook is negative and bearish for the currency.
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Fountain: Reserve Bank of Australia
The Reserve Bank of Australia (RBA) publishes the Minutes of its monetary policy meeting two weeks after the interest rate decision is announced. It provides a detailed record of the discussions held among RBA board members on monetary policy and economic conditions that influenced their decision on interest rate adjustment and/or bond purchases, which had a significant impact on the AUD. The minutes also reveal considerations on international economic developments and the value of the exchange rate.
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.
