Aussie Strengthens, RBA and China Data Support
The Australian dollar strengthened against the US dollar on Tuesday (June 30th), supported by the Reserve Bank of Australia's hawkish tone and improving Chinese economic data. AUD/USD traded around 0.6915, reflecting limited gains amidst market caution regarding the Fed's policy direction.
Key support for the Aussie came from the minutes of the RBA meeting on June 16th. The Australian central bank unanimously decided to maintain its benchmark interest rate at 4.35%. However, the RBA left open the possibility of additional rate hikes if inflation does not decline sustainably towards its target.
In the minutes, the RBA emphasized that inflation remains well above its target and that monetary policy needs to remain restrictive. The central bank also stated that it will do what is necessary to maintain price stability and support full employment, including raising interest rates again if needed.
This hawkish tone helped support the Australian dollar as the market perceived the RBA as not yet ready to shift its policy direction to a more lenient one. As long as price pressures remain strong and domestic demand remains abundant, the possibility of Australian interest rates remaining high for longer remains open.
Sentiment from China is also a positive factor for the Aussie. China's official manufacturing PMI rose to 50.3 in June from 50.0 the previous month, higher than market expectations of 50.1. A reading above 50 indicates manufacturing activity has returned to expansion.
China's non-manufacturing PMI also improved to 50.2 from 50.1, exceeding previous estimates of contraction. As China is Australia's largest trading partner, improving manufacturing and services activity tends to boost expectations for Australian commodity demand.
However, the AUD/USD's gains are being held back by a relatively stable US dollar. The greenback previously weakened due to end-of-quarter profit-taking, but remains supported by expectations that the Federal Reserve will maintain its tight policy stance.
From the US, the Conference Board Consumer Confidence Index edged up to 91.2 in June from a revised 90.6 in May. This increase indicates slightly improved household sentiment, particularly as falling oil prices helped ease inflation concerns. However, this figure is still below market expectations, so it is not strong enough to push the dollar up aggressively.
The market is now monitoring whether the US economy remains strong enough to keep the Fed cautious. If US employment and inflation data are again solid, the US dollar could strengthen again and limit the Aussie's gains. Conversely, if US data weakens, AUD/USD has the opportunity to continue its recovery.
Technically, the 0.6900 area is an important psychological level for AUD/USD. As long as the price remains above this area, the opportunity for strengthening to 0.6950 remains open. However, if the US dollar strengthens again, the pair risks falling back to the 0.6870 to 0.6850 area.
Overall, the current movement of AUD/USD is supported by a combination of the RBA's hawkish tone and better Chinese data. However, its future direction will still depend heavily on US economic data and market expectations regarding the Fed's policy. (arl)
Source: Newsmaker.id
