Australian Dollar Holds Higher As US Dollar Struggles To Overcome Economic Concerns
The Australian Dollar (AUD) strengthened against the US Dollar (USD) on Wednesday (21/05), bouncing back after falling more than 0.50% in the previous session. The AUD/USD pair strengthened as the US Dollar extended its decline, pressured by cautious remarks from Federal Reserve (Fed) officials on the economic outlook and business sentiment.
Speaking at a panel discussion hosted by the Federal Reserve Bank of Atlanta, San Francisco Fed President Mary C. Daly and Cleveland Fed President Beth Hammack expressed growing concerns about the US economy. While key economic indicators remain solid, both officials pointed to deteriorating business and consumer confidence, attributing part of the shift in sentiment to US trade policy.
The Reserve Bank of Australia (RBA), at its May policy meeting, lowered the Official Cash Rate (OCR) by 25 basis points, from 4.1% to 3.85% — a move widely anticipated by the market. In a press conference after the decision, RBA Governor Michele Bullock explained the importance of reining in inflation and reaffirmed confidence in the central bank’s strategy. Bullock described the rate cut as a proactive, confidence-boosting move that is appropriate given current economic conditions. She also noted the Board’s readiness to take further action if needed, hinting at the possibility of future adjustments.
Political instability in Australia also weighed on the AUD. The opposition coalition collapsed after the Nationals withdrew from their alliance with the Liberals. Meanwhile, the ruling Labor Party capitalized on the chaos, returning to power with a stronger and broader mandate.
Source: FXStreet
