The Australian Dollar has seen a huge backward step in the past 10 days and today sits below the 0.70c mark after closing out the week down 2.29% and then opening on Monday down again. As of Monday evening its trading at 0.6979 with a low of 0.6956.
The local Aussie suffered a double hit as Friday evening seen a higher than expected inflation figure from the US with a reported 8.6% reading, even higher than the expected 8.3% and miles ahead of their target rate of 2-3%. This led to a big swing in the USD late on Friday which saw the AUD/USD exchange rate fall before the weekend close.
The Monday open did nothing to help the Aussie as news from China over the weekend regarding another potential outbreak of COVID cases seen Shanghai introduce lockdowns to several restaurants and other areas of the city. This has sparked fear that we may see another heavy handed approach and lockdown of some of the busiest areas of China which we saw a massive knock on effect for their economy, and in turn the local economy due to delays and backlogs in manufacturing and shipping.
Focus is now shifting to the US Federal Reserve with the market now looking at a potential 50bps move in July and again in August to try and help cool inflation which is getting quickly out of control.
While the USD has found favour as the safe haven again, the AUD/USD has some real concerning support levels if you are an importer. We are hoping to hold the 0.70c mark, however after this week see important and potential drops to 0.6840 - 0.6694 - 0.6253 and then after that is the COIVD drop which seen the AUD/USD reach 0.5525 in 2020.
The USD has also seen big moves against both the GBP and EUR in the last few weeks, with expectations of continued rate rises in the US the USD has the potential to go from strength to strength against it's counterparts which are not seeing as much movement or hawkish tones from their central banks.
An important few weeks coming up, especially for Australian importers! Can you afford to be paying 0.62-068c for your goods?
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