The Australian Dollar has been facing significant declines recently due to fading RBA gains and disappointing PMI data. The AUD/USD pair has been testing key support levels, with selling pressure originating from Asian markets following weak June preliminary PMI figures from Australia. Additionally, high US Treasury yields and positive PMI data from the US have contributed to the strengthening of the USD.
Despite indications of economic fragility in Australia, persistently high inflation has led the RBA to hold off on potential rate cuts, which may help offset losses for the Aussie. The RBA is expected to be one of the last G10 central banks to implement rate cuts, which could support the Australian Dollar.
The Australian economy reported weaker-than-expected preliminary data from the June PMI figures, with declines in Manufacturing, Services, and the Composite rate. In contrast, the US private sector has shown solid growth, with the S&P Global Composite PMI improving slightly. Governor Bullock confirmed that the RBA discussed potential rate hikes and emphasized the persistence of high inflation. The RBA remains prepared to take necessary actions to bring inflation back within target levels.
Market expectations point to potential easing by December 2025, while rate hikes in August and September are still under consideration by the RBA. The Fed has signaled only one cut in 2024, with hopes for a September cut in the markets.
From a technical analysis perspective, the AUD/USD pair shows signs of weakening bullish momentum, with the RSI tilting downwards and the MACD charting red bars. To confirm a stronger buying stance, the pair needs to maintain support above the 20-day SMA. Sellers may continue testing this support level in upcoming sessions to gauge its strength.
Central banks play a crucial role in maintaining price stability within an economy or region. They use tools such as adjusting policy rates to manage inflation levels. Central banks like the Fed, ECB, and BoE aim to keep inflation close to 2%. Members of central bank policy boards have varying views on monetary policy, with ‘doves’ favoring looser policies and ‘hawks’ advocating for higher rates to control inflation.
Chairmen or presidents of central banks lead meetings, aiming to reach a consensus among members. Speeches by the chairman provide insights into the current monetary stance and outlook. Central banks communicate with markets to minimize disruptions and maintain stability. The author and FXStreet do not provide personalized recommendations or investment advice.
In conclusion, the Australian Dollar’s recent decline can be attributed to a combination of fading RBA gains, disappointing PMI data, and external factors such as high US Treasury yields. The RBA’s cautious approach to rate cuts and persistent inflation may provide some support for the Aussie in the near term. Market watchers are keenly observing further developments to gauge the currency’s future trajectory.