The Australian Dollar experienced losses at the end of the week due to disappointing Purchasing Managers’ Index (PMI) data, reflecting concerns about the country’s economy. Investors are closely watching these developments in the global market. This article will explore the reasons behind the Australian Dollar’s decline and its implications for the economy.
Australian Dollar Continues to Decline
The Australian Dollar (AUD) faced losses against other currencies, particularly the USD. The AUD/USD pair tested crucial support levels, indicating selling pressure following weak June preliminary PMI data from Australia. Additionally, high US Treasury yields and positive PMI data from S&P in the US boosted the USD.
Economic Fragility in Australia
Despite signs of economic weakness in Australia, high inflation rates have delayed potential rate cuts by the Reserve Bank of Australia (RBA), potentially offsetting the losses of the Australian Dollar. The RBA is hesitant to implement rate cuts, possibly making the Aussie one of the last G10 central banks to do so, which could support the currency.
Market Analysis
- Weaker PMI data from Australia contrasts with strong US economic activity.
- Governor Bullock discussed potential rate hikes, indicating a conservative approach to monetary policy.
- The RBA remains focused on controlling inflation within target ranges.
- Market expectations hint at easing by the end of 2025, with potential rate hikes later in 2021.
- The Federal Reserve signals one rate cut in 2024, while markets anticipate a cut in September.
Technical Analysis
The AUD/USD pair shows weakening momentum, with indicators like RSI and MACD suggesting a bearish trend. To confirm a stronger buying stance, the pair must maintain support above the 20-day SMA. Sellers may test this support level in upcoming sessions to assess its strength.
Central Banks Overview
Central banks play a crucial role in maintaining price stability within an economy. By adjusting policy rates, central banks control inflation levels. Members of central bank boards have varying views on monetary policy, with doves advocating for low rates and hawks supporting higher rates to combat inflation.
Disclaimer
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