Key Point
- AUD/USD nears one-month high, setting for best week since November
- U.S. Inflation Ease Strengthens Investor Belief That U.S. Interest Rates May Soon Peak
- Australians react little to Michelle Block’s appointment as RBA governor
Market players expect the Federal Reserve (Fed) to be nearing the end of its rate hike cycle as inflation subsides, with the Australian dollar continuing its gains against the U.S. dollar on Friday, likely 11-11 2022. It was expected to record the best week since the beginning of the month.
Thursday’s data showed U.S. producer price inflation rose at its lowest annual rate in three years in June.
A day earlier it was revealed that US annual headline CPI inflation slowed to 3% in June and annual core CPI inflation slowed to 4.8%.
“The market overall feels pretty good about the decline in inflation data because lower inflation and a still resilient labor market support a soft landing for the US economy,” said Carol Kong, currency strategist at Commonwealth Bank of Australia. It’s the body,” he said. According to Reuters.
“However, we still maintain our view that the US will slip into recession later this year due to the impact of past and future rate hikes.”
Markets are pricing in a more than 90% chance of a 25 basis point rate hike at the FOMC meeting later in July, but no further rate hikes for the remainder of 2023.
Fed President Christopher Waller said Thursday he supports two more quarter-point rate hikes this year.
“There’s no reason the first of these two rate hikes shouldn’t happen later this month,” Waller said in a speech ahead of a meeting hosted by the New York University Money Marketers.
“If inflation continues to show no progress and there are no signs of a significant slowdown in economic activity, a second rate hike of 25 basis points should come sooner or later, but that decision is for the future,” he said.
Australians, on the other hand, responded subdued to media reports that Michelle Block was appointed as the next Reserve Bank of Australia governor to replace Philip Lowe and become the first female chief financial officer. Block is considered a safe pair by analysts.
As of 7:31 GMT on Friday, AUD/USD is down 0.32%, trading at 0.6867. Early in the Asian session, the major forex pair rose to 0.6895. The latter has been the pair’s strongest level since June 16 (0.6899).
AUD/USD was set to gain 2.62% over the week.
