Soft Australian Data Pressures AUD, AUD/USD Steady
The AUD/USD pair weakened slightly during Friday's Asian session, trading around 0.7160. Despite opening with a bullish gap and remaining in positive territory, the pair faced pressure as the Australian dollar struggled to find new support.
The main trigger came from declining market expectations for further interest rate hikes by the Reserve Bank of Australia (RBA). A series of indicators, including lower-than-expected April inflation, weak consumer spending, and a cooling labor market, reinforced the view that the RBA's previous tightening measures were beginning to effectively slow the economy.
With weakening domestic signals, market participants aggressively reduced the odds of a June interest rate hike. Focus now shifts to next week's releases, such as the manufacturing PMI survey, trade balance data, and GDP figures, to assess the extent of Australia's economic slowdown.
Globally, the risk-sensitive AUD could potentially find support if market sentiment improves as pressure eases on oil prices, following reports of an extension of the 60-day US-Iran ceasefire, which also opens the door to smooth shipping through the Strait of Hormuz. However, this support remains limited as the market awaits the finalization of the agreement.
MUFG warned that the US dollar could strengthen significantly if a ceasefire fails to be finalized, as the conflict risks re-increasing inflationary pressures through energy disruptions, raising US Treasury yields, and shifting the Fed's policy tone toward a more hawkish direction. Regarding the direction of AUD/USD, the market will be monitoring the certainty of the US-Iran agreement, movements in US oil and yields, and a series of Australian data next week that will reshape RBA expectations. (asd)
Source: Newsmaker.id
