The Australian dollar has reversed directions on Wednesday. In the North American session, AUD/USD is trading at 0.7518, up 0.32% on the day.
FOMC minutes loom
This week’s key event risk is the June FOMC minutes, which will be released later in the day (18:00 GMT). The June meeting shook up the markets, as the Fed moved up its timeline for rate hikes. Up until that point, the Fed insisted that the rise in inflation was transient and that it would not raise rates before 2024. At the meeting, the Fed changed course, raised its expectations for inflation and said that it expected to hike rates twice in 2023.
The minutes could well reflect the hawkishness of the June meeting, but this stance may be stale, given that last week’s jobs report showed that unemployment jumped from 5.6% to 5.9%, as well weak wage growth. Even with NFP outperforming, with a solid gain of 850 thousand, the markets seem less concerned about runaway inflation, and a taper in the bond-buying programme appears a long way off.
RBA scales back QE but remains dovish
The RBA sounded somewhat dovish about the economy, but still pressed the QE trigger and lowered bond purchases from AUD5 billion per week to AUD 4 billion per week. Predictably, the markets gave a thumbs-up on the news of a taper and the Australian dollar jumped on the news. However, some caution is warranted before jumping on the Aussie bandwagon in expectations that the upswing will continue. The RBA reminded its listeners that it intends to continues monetary stimulus until conditions improve further. The central bank has said it does not plan to raise rates until inflation rises to 2-3% and wage growth reaches 3%, which the bank has projected will not materialize before 2024.
- AUD/USD is facing resistance at 0.7604 and 0.7681
- On the downside, there are support levels at 0.7447 and 0.7367
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event
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