The Australian Dollar has crossed back above 0.70c against the US Dollar for the first time since the middle of June, reaching a high of 0.7047 overnight.
World inflation figures and interest rate decisions are still being seen as the major driver behind the moves in the market, and after the US raised again by 75 points on Thursday, the USD didn't really continue it's strong push.
The markets have now had this priced in for a while and after the speculation of a 1% increased was hosed down weeks ago, the USD has cooled across the board after spending the first half of 2022 on a very strong uptrend.
We have seen in the previous couple of the months the AUD/USD break below the 0.70c mark, then fail to hold at 0.6850 and fall all the way to 0.6681 on June 14th, before a recovery which has seen the AUD rebound with a 5% increase in the past 2-3 weeks, a welcome sign for importers.
In the background, commodity prices have been steadying and mostly drifting higher on the back of a weaker US Dollar. The situation in China continues to plague global supply chains due to their zero case Covid-19 policy shutting down major centres on a rolling basis.
Today sees the next RBA meeting and expectations of a further 50 basis point rate hike are priced in, which would see the cash rate in Australia move to 1.85% the highest since May 2016, and could provide another boost for the AUD and continue its move away from 0.70c.
The AUD/NZD has pushed higher again after trading sideways for a few weeks, with the rates breaking past $1.11 in the past week, something only seen for a couple of days in June this year, however before that was back in 2018.
The RBNZ meets this week with expectations of a rate increase also expected, inflation rates remain near multi-decade highs and the labor market continues to be a bright spot in the NZ economy. The RBNZ has been expected to raise rates every meeting, however talks have started to show a potential slow down in increases for now, and not as aggressive, which has seen some weakness in the Kiwi.
The GBP/AUD seems to have found a bottom in recent months around $1.7290 and a top at around $1.78, having bounced off these area several times, this pair is unsure of which way it's going to move and see if it can break either of these support or resistance areas.
The Bank of England is likely to raise rates by 50 basis points this week, bringing their main rate to 1.75%, according to a Bloomberg survey. But much like the Federal Reserve last week, a rate hike may not be enough to keep the British Pound moving higher as it seems to be priced into the markets currently. Instead, focus is on the BOE’s forward guidance: how many more rate hikes are coming down the pipeline will likely determine if we see more sideways action or this pair can break one way or another.
The UK still has several issues on it's plate with energy problems, a lack of growth and at the same time very high inflation figures, There are many reports from the UK about the slowing down in some construction area and new builds, which is also being hampered by China and their COVID stance.
Overall, some positive movement in the AUD and possibly a time to look to manage your risk as there is still several issues surrounding the economy. The main headline to be aware of is the AUD rebound with a 5% increase in the past 2-3 weeks and how to potentially take advantage of that.
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