The AUD/USD closed the week with losses, owing to a change in attitude and anticipation of an aggressive Federal Reserve. Over the previous week, US inflation statistics fueled a comeback for the greenback, while US Treasury bond rates rose.
The AUD/USD is anticipating a busy economic calendar in Australia and the United States next week. USD’s After reaching a daily high of 0.6884, the Australian dollar (AUD) concluded the week on the back foot. It declined on a risk-off impulse as Wall Street completed the day with losses ranging from 0.26% to 0.58%, with the Dow Jones being the exception, closing 0.39% higher than it had started. The AUD/USD currency pair is now trading at 0.6877.
As investors upped their wagers that the US Federal Reserve (Fed) will tighten policy more than anticipated, global markets ended on a negative note. The Consumer Price Index (CPI) and Producer Price Index (PPI) inflation numbers for January in the United States (US) released last week were lower than the statistics for December but higher than forecasts. In actuality, the PPI monthly reading exceeded expectations and the reading from the previous month, which was the week’s high point and supported Fed members’ hawkish rhetoric.
The presidents of the Cleveland and St. Louis Federal Reserves, Loretta Mester and James Bullard, said on Thursday that there is strong support for raising interest rates by 50 basis points at forthcoming meetings.
Fed Governor Michell Bowman reaffirmed that “we haven’t defeated inflation” today and said that the US central bank has not yet stopped tightening monetary conditions. After an event in Rosslyn, Virginia, Richmond Fed President Thomas Barkin told reporters that raising interest rates “will be necessary” to bring inflation back to the Fed’s target level of 2%. We’ll have to wait and see how many of them there are, but what you see is progress, although sluggish progress; you don’t see triumph.
The Reserve Bank of Australia’s (RBA) Governor Philipe Lowe stated in another Asian session statement that the RBA board anticipates that additional rate increases will be required “over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary.”
The eventual outcome, according to Lowe, will be even higher interest rates and more unemployment in the future if we don’t quickly control inflation.
The US Dollar (USD) recovered composure and put pressure on the Australian currency in light of the background and worse than anticipated Australian labor market data reported on Wednesday. At about 0.6989, the AUD/USD pair fell to the week’s low of 0.6811.
What should you look out for?
The Manufacturing, Services, and Composite PMIs, the Composite Leading Index, and the Wage Price Index will all be on the Australian economic docket. The calendar for the US will include information on Q4 GDP estimates, IJC, the Fed’s favored inflation indicator, and the final reading of the University of Michigan Consumer Sentiment Index.