AUD/USD Poised for Third Weekly Weakness, Here's How!
The Australian dollar fell below US$0.705 again in the latest trading on Friday (June 19th) and is near its lowest level in approximately ten weeks. The Australian currency is also likely to post its third consecutive weekly decline. The main pressure comes from the continued strengthening of the US dollar after the Federal Reserve held interest rates steady but signaled that a rate hike is still possible in the coming months.
Meanwhile, market expectations regarding Reserve Bank of Australia (RBA) policy have begun to shift. After the Australian central bank decided to hold interest rates at its latest meeting, market participants have become increasingly confident that the country's monetary tightening cycle may be nearing its end. The probability of one additional interest rate hike this year is now estimated at only around 50%, lower than previously.
However, RBA Governor Michele Bullock emphasized that the central bank remains open to further interest rate hikes if inflationary pressures show no signs of abating. However, most market participants believe a much higher-than-expected surge in inflation in the second quarter would be necessary for the RBA to have a strong case for further monetary tightening.
Meanwhile, the US dollar continued to gain support after the dollar index reached its highest level in a year. The Federal Reserve's hawkish stance has led investors to increase bets on the possibility of further interest rate hikes. Nearly half of the Fed's policymakers expect at least one rate hike this year amid growing inflation concerns. On the positive side, the interim agreement between the United States and Iran and the resumption of energy supplies through the Strait of Hormuz have slightly boosted global risk sentiment, limiting the weakening of the Australian dollar, which is known to be sensitive to changes in market sentiment. (asd)
Source: Newsmaker.id
