Fast Pace of Recovery
The early hours of Thursday showed a favorable time for the AUD/USD currency pair as it witnessed a good intraday recovery from the region of 0.7075, which happened to be the lowest point it had been at since this year’s 7th of February. It reached the lowest point last Thursday after a series of pullbacks.
AUD/USD price chart. Source TradingView
The pace of the new recovery was stretched through the early part of the European session, and it was able to boost spot prices to a new daily high point in the vicinity of the 0.7160 benchmarks within an hour before this piece.
Australia’s Bureau of Statistics made a report on Wednesday that the country’s consumer price index soared at its fastest yearly momentum in about twenty years in the course of this year’s first quarter. The report added to speculations that the Reserve Bank of Australia might go ahead to increase interest rates from the current lowest levels as early as the coming week. In conjunction with the market’s risk-on mood, this gives more support to the Australian dollar, that’s perceived to be a riskier asset.
Sufficient Market Conviction for Rates
Meanwhile, in the US, on the other hand, the dollar stepped down a bit from its five-year high point in the midst of a more dovish tone and atmosphere around the US Treasury’s bond yield. Consequently, this became considered one of the factors that created intraday covering around the AUD/USD currency pair for the short-term. With that in mind, the possibility of an aggressive monetary policy coming from the Federal Reserve is expected to act as a tailwind for the US dollar and cap any gains for the pair.
There is now enough conviction in the market that the US Federal Reserve is going to increase interest rates by the speculated 50 basis points during its meeting from the 3rd to the 4th of May. There are further bets that the same 50 basis points increments would be repeated at the reserve’s meeting in June and July and finally raise rates to about 3.0% towards the year’s end.
Aside from all these, the worsening economic condition on the global scale favors bullish traders of the US dollar, and this calls for a level of caution on the side of traders before they position for more appreciation of the AUD/USD currency pair.
Market players are now focused on economic dockets from the US as it highlights the publication of the GDP data from Q1 and the regular weekly unemployment claim.