AUD to USD
The AUD/USD has fallen to its lowest point since December 2020 after a 2.9% drop last week and closing the week at 0.7478 after starting the week at 0.7704. This was not so much weakness in the local AUD, rather than a strong turnaround in appetite for the USD after comments from the US central bank has sharply raised its forecasts for inflation this year and flagged two rate increases by the end of 2023 to the surprise of the markets, and saw a really sharp rally in the USD, and having it's best week since March 2020. The USD has been in a strong down trend of over 12 months, and this could be seen a potential "circuit breaker" and a maybe a key turnaround for the greenback. The USD continued its move upwards even though the U.S reported disappointing macro data. The U.S dollar index, DXY, is near its two-month high of around 92, which confirms that investors are buying the safe haven greenback, sliding the pair downwards. Despite the encouraging Australian job data last week -- 115,00 new additions in jobs versus the forecasted 30,000 -- the Aussie remained under pressure after these comments came very much unexpected from the US Federal Reserve.
No high tier Australian data out this week, and towards the end of the week, several important releases form the US. A very key week for the AUD/USD to see if there is to be some sort of rebound, or are we heading lower!
During the outgoing week, the EUR/USD pair also edged down from 1.12104 to 1.1858, taking a cue from the Federal Reserve's hawkish tone that unnerved investors. As a result, demand for the greenback rose as investors ran for cover amid the apprehensions regarding the possible rate hikes in 2023.
However, the European Central Bank in its meeting adopted a more cautious approach as it reaffirmed its accommodative monetary policy and extended the leverage ratio relief for banks until March 2022. Also contributing to the strong dollar is the ECB's unabated buying of bonds that will likely continue until September.
The ECB president Lagarde will speak on Monday, June 21 while German and French manufacturing data will be released on Wednesday, which might set the direction of the EUR/USD pair.
During the outgoing week, the GBP/USD pair plummeted from 1.4090 to 1.3803, copying the overall rising trend of the USD that started after the Fed's hawkish stance. Although the UK reported 92,600 fewer jobless claims in May, the Consumer Price Index (CPI) and Core CPI jumped to 2.1% and 2% respectively, worrying investors about the rising inflation. British Pound was under pressure as the UK delayed the planned opening of its economy by four weeks at least after the surge in Delta variant cases.
The Bank of England will make its interest rate decision on Thursday, June, 24, while manufacturing and services data will be released on Wednesday, June 23. Both of the events are critical and can decide the future direction of the pair.