AUD/USD trims a part of post-RBA gains to the highest level since mid-May – by hareshmenghani AUDUSD RBA Inflation Fed Currencies
ever, trim a part of intraday gains and trade around mid-0.6600s, still up nearly 0.50% for the day heading into the North American session.
The Australian Dollar strengthens across the board in reaction to the Reserve Bank of Australia's surprise 25 bps rate-hike and provides a goodish lift to the AUD/USD pair. The unexpected lift-off for the second straight month pushes the benchmark interest rates above 4% for the first time in nearly 12 years. Moreover, RBAacknowledged that inflation is still too high and that high prices would cause more economic damage than a near-term rise in interest rates.
Adding to this, the central bank maintains a hawkish bias and said that some further tightening of monetary policy may be required to bring inflation back to its target range within a reasonable timeframe, which further underpins the Aussie. That said, the prevalent cautious mood around the equity markets helps revive demand for the safe-haven US Dollar , which holds back bullish traders from placing fresh bets around the AUD/USD pair and caps any further upside, at least for the time being.
Any meaningful upside for the USD, however, seems limited amid expectations for an imminent pause in the Federal Reserve's policy tightening cycle. In fact, the current market pricing indicates a greater chance that the US central bank will leave interestunchanged at its upcoming monetary policy meeting on June 13-14.
The aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside and any meaningful pullback might still be seen as a buying opportunity. There isn't any relevant market-movingdue for release from the US on Tuesday. Hence, market participants now look forward to RBA Governor Philip Lowe's speech and the release of the first quarter GDP report from Australia for some meaningful impetus during the Asian session on Wednesday.
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