The AUDUSD currency pair was trading down over 80 pips as the US dollar rallied against the Aussie dollar, driven by the release of the Reserve Bank of Australia’s July monetary policy meeting minutes. The move lower was also fueled by concerns about the Chinese economy’s prospects.
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The move by the People’s Bank of China (PBoC) to slash its 1-year and 5-year loan prime rates by 10 bps each triggered the initial decline in the Aussie dollar as the US dollar remained relatively stable against other leading currencies.
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The currency pair’s decline was also associated with the RBA meeting minutes that indicate the central bank might pause its rate hikes at the July meeting, following closely on the heels of its neighbour New Zealand and the United States.
China is expected to continue easing its monetary policies given the low inflation witnessed in the country, unlike in most Western countries where inflation has been running at record highs. Countries such as the UK continue to battle record-high inflation.
Investors fear the weak Chinese economic outlook would affect Australia’s economy, given that China is the country’s largest trading partner. However, China’s economy has pockets of growth in sectors that involve the new economy and innovative tech segments.
The RBA minutes also indicated that the central bank's policymakers were hesitant about raising interest rates and were close to leaving them unchanged. Most analysts now believe the RBA will keep interest rates unchanged during the July meeting.
Looking at the US dollar, we find that the US Dollar Index was up moderately as US markets reopened following an extended holiday that saw US markets closed yesterday (on Monday)to celebrate the Juneteenth holiday that marks the emancipation of enslaved Black people.
Investors were also awaiting the release of US building permits, and housing starts data, which surprised the upside boosting the US dollar in the American sessions and pushing the currency pair lower.
The AUDUSD currency pair has broken back below a crucial support level, and it remains to be seen if the level will hold in the coming days.
*This is not investment advice.
The AUDUSD price chart.
The AUDUSD currency pair was trading down 80.4 pips (1.17%) as the US dollar rallied against the Aussie dollar.
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