As the US Dollar hits a four-month low, the AUD/USD pair bounces back from an eight-month low of 0.6350, showing signs of strength in the Australian Dollar. Despite the recovery, the Australian Dollar remains under pressure due to dismal market sentiment and escalating tensions in the Middle East.
The recent risk aversion in global markets has dampened the appeal of risk-sensitive assets, including the Aussie. The US Dollar Index (DXY) has slid sharply to near 102.60, reflecting a decline in investors’ risk appetite.
Investors are now eagerly awaiting the Reserve Bank of Australia’s (RBA) monetary policy decision, scheduled for Tuesday. The RBA is expected to keep its key Official Cash Rate (OCR) unchanged at 4.35%, with a focus on interest rate guidance for future movements.
In addition, the upcoming release of the US ISM Services PMI for July at 14:00 GMT will be closely monitored by investors. The PMI report is expected to show an expansion in the services sector, with particular attention to indicators like Prices Paid and New Orders.
Market Analysis Breakdown:
- Key Factors for AUD: Interest rates set by the RBA, price of Iron Ore, health of the Chinese economy, inflation rate, growth rate, and Trade Balance.
- RBA Influence: RBA adjusts interest rates to maintain stable inflation, with high rates supporting the AUD and vice versa. Quantitative easing and tightening also impact the currency.
- Chinese Economy Impact: Australian Dollar is influenced by Chinese economic health, with positive growth boosting AUD demand.
- Iron Ore Prices: Australian Dollar is driven by Iron Ore prices, with higher prices leading to AUD appreciation.
- Trade Balance: Positive Trade Balance strengthens the AUD, reflecting demand for Australian exports.