Australian Dollar remains subdued following PBoC’s Interest Rate Decision, RBA eyed
The Australian Dollar (AUD) dips against the US Dollar (USD) on Tuesday, following a gain of over 0.50% in the previous session. The AUD/USD pair remains under pressure after the People's Bank of China (PBoC) announced its Interest Rate Decision. The PBoC announced a reduction in its Loan Prime Rates (LPRs) on Tuesday. The one-year LPR was lowered from 3.10% to 3.00%, while the five-year LPR was reduced from 3.60% to 3.50%. Given the close trade relationship between Australia and China, any change in the Chinese markets can significantly impact the Aussie Dollar.
Market attention now turns to the Reserve Bank of Australia's (RBA) upcoming rate decision scheduled for later in the day. The central bank is expected to cut interest rates by 25 basis points, following last week's stronger-than-anticipated employment data.
The AUD/USD pair strengthened on Monday as the US Dollar weakened in the wake of Moody’s Ratings downgrading the US credit rating from Aaa to Aa1. This move aligns with similar downgrades by Fitch Ratings in 2023 and Standard & Poor’s in 2011. Moody’s now projects US federal debt to climb to around 134% of GDP by 2035, up from 98% in 2023, with the budget deficit expected to widen to nearly 9% of GDP. This deterioration is attributed to rising debt-servicing costs, expanding entitlement programs, and falling tax revenues.
In addition, the risk-sensitive Australian Dollar gained support from renewed optimism surrounding a 90-day US-China trade truce and hopes for further trade deals with other countries. Meanwhile, US Treasury Secretary Scott Bessent told CNN on Sunday that President Donald Trump intends to implement tariffs at previously threatened levels on trading partners that do not engage in negotiations “in good faith.”
Source: Fxstreet
