AUD falls as trade balance shrinks

The Australian dollar has extended its losses and has fallen below the symbolic 75 line. In the North American session, AUD/USD is trading at 0.7475, down 0.45% on the day.

Central bank announcements have been sending the Australian dollar up and down this week like a yo-yo. On Tuesday, the RBA soared 200 points at one stage, as the rate statement omitted the word “patient”, a hallmark of Governor Lowe’s monetary stance. Lowe appears to have thrown in the towel on requiring wage growth of 3% before raising rates, and the markets are expecting a series of hikes starting in June.

The Fed followed the RBA with the FOMC minutes on Wednesday, and the aggressive tone sent the Aussie tumbling almost 1 per cent. The minutes signalled that the Fed plans to scale back the balance sheet at a faster pace than previously expected, trimming up to USD 95 billion/month starting in September. As well, the minutes hinted that the Fed could implement super-size 1/2 point hikes in the coming months, in order to curb red-hot inflation. The minutes raised the inflation forecast for 2022 to 4.3% (2.6% prior), while downgrading the growth forecast to 2.8% (4% prior), but the overall tone of the minutes was clearly hawkish, sending the US dollar to higher ground.

Australia’s surplus shrinks

Australia’s Trade Balance for February was a major disappointment, as both exports and imports missed expectations. The headline figure dropped to AUD 7.45 billion, its smallest since March 2021. This was down sharply from AUD 11.79 billion in January and short of the estimate of 12.00 billion. Exports were almost flat, but it was imports that surprised, with a jump of 12.0%, vs. 1.0% expected. The finger of blame can be pointed at cost-put inflation, which pushed up the prices of imports, notably industrial supplies, fuels and transport equipment.

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AUD/USD Technical

• 0.7582 is a weak resistance line. Above, there is resistance at 0.7682
• There is support at 0.7458 and 0.7416

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