This week is promised to be a major mover for the Forex market, and the AUD is far from being excluded from potential movement.
Between Central Bank meetings, including Wednesday’s FOMC and Australia’s Quarterly Inflation data, AUD Traders must stay prepared for the upcoming action.
The Royal Bank of Australia held its Main Rate at 3.85% at the beginning of July, citing higher inflation and more than decent employment figures. However, the week after, the figures were not as good.
The initial reaction was stronger for the AUD, but the motion is starting to show some change right after the pair hit some 8-month highs.
Some headwinds are in the longer-term outlook for the Currency pair. Australian funds are increasingly hedging their foreign investments (particularly with the US), which would typically increase fundamental demand for the currency.
This is already taking place, as evidenced by the consistent and stable uptrend formed after the Liberation Day troughs. But markets are forward-looking, and traders need to adapt fast.
The upcoming Wednesday FOMC meeting will be a major key to the pair’s dynamics, with a focus on the FED’s communication.
The RBA still has about 60 bps of cuts priced in for the rest of the year (with a cut largely priced in for the next meeting), and this pricing is subject to much change, particularly with the inflation data coming up. FYI, the upcoming RBA meeting will be taking place on August 12.