Australian dollar hotspots
AUD / USD is facing the risks of a large number of major events coming to the end of July, as the Australian Consumer Price Index (CPI) is expected to rise to a 13 – year high, while the Federal Reserve appears to be on track to adjust future monetary policy guidelines.
Basic forecast for the year Australian dollar: Neutral
AUD /USD carves a number of higher and lower levels as it recovers from a fresh monthly lower level (0.7289) and the Australian CPI report may affect Federal Open Market Committee (FOMC) interest rate decision, as inflation is projected to rise to 3.8% in the second quarter of 2021, the highest reading since 2008.
Signs of stronger-than-expected inflation in the Australian dollar could trigger a bullish reaction Reserve Bank of Australia (RBA) calls for it “CPI inflation is expected to rise temporarily to around 3% until the June quarter,” and a sharp rise in consumer prices could put pressure on the central bank to change its tone over the rest of the year if “tAustralia’s economic recovery is stronger than previously expected and is projected to continue. “
However, the lower-than-expected CPI press could push the AUD / USD backwards, as it encourages the RBA to maintain its current monetary policy stance and the board may continue to wait and see at next August’s meeting. 3 as Governor Philip Lowe defines full employment where the head of the central bank promises “Provide the necessary financial support for the economy to move from a renewable phase to an enlargement phase. “
In the meantime, the FOMC may begin to adjust its forwarding as “veager participants mentioned that they expect the conditions for lowering the asset purchase rate to be met somewhat earlier than they had expected at previous meetings;, And recent developments from the central bank may trigger an upward reaction in Euroserv US dollar when the Commission presents an initial exit strategy.
On the other hand, Greenback may face headwinds The chairman Jerome Powell tells U.S. lawmakers that FOMC give advance notice to reduce the purchase rate,“ and the central bank may simply try to wait until “t. before this quarterly meeting in Septembercommittee standard “significant progress“ generally considered outstanding. “
That being said AUD / USD is likely to face higher volatility at the end of July and it remains to be seen whether the risks of the main event will affect the exchange rate between the RBA and the FOMC.
– Written by David Song, currency Strategist
Follow me on Twitter at @DavidJSong