- The AUD/USD ranges around 0.6420 while the US dollar struggles to extend its rise despite the fact that the Fed indicates that there is no hurry for trimming of interest rates.
- The president of the Fed, Powell, warns that the risks of greater inflation and unemployment have increased.
- Investors expect commercial conversations between the US and China in Switzerland on Saturday.
The Aud/USD pair remains plane around 0.6420 during negotiation hours in North America on Thursday. The Australian pair struggles to find address, while the US dollar (USD) yields initial profits.
The US dollar index (DXY) rose to about 100.20, earlier in the day, by signs of the Federal Reserve (Fed) that monetary policy adjustments are not appropriate in the midst of uncertainty about the economic perspectives of the United States (USA) under the leadership of President Donald Trump. However, the USD index has flattened around 99.90 at the time of publication.
The Fed guide that there is no hurry for interest rate cuts came after the Central Bank kept them stable in the range of 4.25% -4.50% per third consecutive meeting.
The president of the Fed, Jerome Powell, warned that “the risks to inflation and unemployment have biased up.” Powell said that tariffs so far are “significantly larger than expected” and we will see “greater inflation and lower employment” if the great increases in tariffs, as announced, are “sustained.”
Meanwhile, investors seek commercial discussions between the US and China, which are scheduled for Saturday in Switzerland. The US Treasury Secretary Meeting, Scott Besent, and Commerce Representative Jamieson Greer, with his Chinese counterparts aims to descale the commercial war, not negotiate a commercial agreement. The tariffs and smokers imposed by both nations are very high, and a commercial agreement cannot be initiated without reducing them.
Any positive result of commercial conversations between the US and China will be favorable for both the US and for the Australian dollar (Aud). Since Australia is Beijing’s main business partner, an improvement in China’s economic perspectives will strengthen the Australian dollar.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
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.
