- The Reserve Bank of Australia (RBA) is expected to raise rates by 50 basis points.
- Aussie is holding steady above 0.6850 on positive Chinese data as RBA decision looms.
- Australian dollar traders should also keep an eye on iron ore prices, which have fallen almost $50 a tonne from record highs.
The AUD trimmed last Friday’s losses and rose on the second day of July, gaining 0.76%, amid a quiet American session. At 0.6864, the AUD/USD reflects an optimistic mood in the forex market.
AUD Benefits from Positive China PMIs Ahead of RBA Decision
European stocks rebounded, as did Asian stocks, except for the Chinese A-50 and the Hang Seng. That said, there is a mixed mood tilted slightly towards the positive, keeping the AUD bet on. In addition, China’s better-than-expected manufacturing PMIs, notably Caixin, are back in expansion territory, despite recent developments around coronavirus zero tolerance.
Another factor keeping the Australian dollar strong is the Reserve Bank of Australia’s monetary policy decision. The RBA is expected to rise 25 to 50 basis points, although the base case for most analysts is the higher.
In a note, analysts at TD Securities wrote: “We believe the Reserve Bank of Australia should raise interest rates by more than 50 basis points at tomorrow’s meeting in light of strong domestic data. We had forecast a 65bps hike for the July meeting, but hearing Governor Lowe’s most recent guidance, which explicitly states that the Board will discuss 25 or 50 at the July meeting, we reversed our decision from last week and expect the RBA to go 50bps higher morning”.
Elsewhere, the dollar recovered some ground, with the US Dollar Index (DXY) up 0.08% to 105.201. Australian dollar traders should keep an eye on iron ore prices, which have fallen to $114.45 a tonne from record highs of $160.
Next week on the Australian economic calendar will be the release of the Global Services and Composite PMIs for June, along with the AIG Construction Index and the RBA’s monetary policy decision. On the other hand, in the US May Factory Orders, ISM Non-Manufacturing PMIs, Fed Speeches and June Non-Farm Payrolls will be released.
AUD/USD Key Technical Levels
Source: Fx Street
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