- The AUD / USD is similar around 0.6400, while investors are waiting for key economic data from the United States this week.
- The Fed is unlikely to adjust monetary policy if the expectations of inflation are accelerating.
- Aussie Q1 CPI data will influence the RBA monetary policy prospects.
The Aud / USD pair recovers the initial losses and turns flat around 0.6400 during European negotiation hours on Monday. The Australian pair is negotiated indecisive because investors expect data on the price of economic and Australian consumer consumer (US), which will be published this week.
The US dollar (USD) is negotiated on the side at the start of the week, with the US dollar index (DXY) oscillating around 99.60.
This week, investors will pay particular attention to the price of personal consumer expenses (PCE), non -agricultural pay data and gross indoor products (GDP), as they will considerably influence market expectations for monetary policy prospects (Fed). Investors will also focus on the manufacturing and American manufacturing and PMI services to find out the impact of new pricing policies by US President Donald Trump on the cost of business owners and possibly the increase in selling prices.
Nourished political decision -makers would be reluctant to make monetary policy adjustments in the event of an increase in inflation expectations. They guided a “wait and see” approach until the clarity of the way in which new government policies will shape economic perspectives.
In the Australian region, investors await data from the consumer price index (ICC) of the first quarter, which will be published on Wednesday. The Australian ICC should have increased by 2.2% compared to the same quarter of the previous year, slower than the 2.4% increase observed in the last quarter. The cooling of inflationary pressures increases expectations that the reserve bank of Australia (RBA) would reduce interest rates at the May meeting.
Meanwhile, growing uncertainty about trade relations between the United States and China will remain the major trigger for the pair. Given the high dependence of Australia to its exports to China, uncertainty increases during the latter's economic prospects, which has an impact on the Australian dollar (AUD).
US dollar FAQ
The US dollar (USD) is the official currency of the United States of America and the “de facto” currency of a large number of other countries where it is in circulation alongside local tickets. It is the most negotiated currency in the world, representing more than 88% of all global turnover, an average of 6.6 billions of dollars of transactions per day, according to data from 2022. After the Second World War, the USD took over from the British book as a global reserve currency. For most of its history, the US dollar was supported by gold, until the Bretton Woods agreement in 1971 when the Order stallion left.
The single most important factor on the value of the US dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to reach price stability (controlling inflation) and promoting full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices are increasing too quickly and inflation is greater than the 2% target of the Fed, the Fed will increase rates, which helps the USD value. When inflation falls below 2% or the unemployment rate is too high, the Fed can reduce interest rates, which weighs on the greenback.
In extreme situations, the federal reserve can also print more dollars and promulgate a quantitative relaxation (QE). QE is the process by which the Fed considerably increases the credit flow in a blocked financial system. This is a non -standard political measure used when credit has dried up because the banks will not lend themselves (by default of the fear of the counterpart). This is a last appeal when the simple drop in interest rates is unlikely to achieve the necessary result. It was Fed's weapon of choice to combat the credit crisis that occurred during the great financial crisis in 2008. It implies the Fed Print more dollars and use them to buy US state bonds mainly from financial institutions. QE usually leads to a lower US dollar.
The quantitative tightening (QT) is the opposite process by which the federal reserve ceases to buy obligations from financial institutions and does not reinvest the principal of the obligations it holds in new purchases. It is generally positive for the US dollar.
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