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Ahead of the RBA Minutes, AUD/USD Consolidates Its Gains above the Mid-0.6500s
AUD/USD fluctuates within a limited range early Tuesday, approaching new monthly highs. A rate reduction of 100 basis points (bps) is accounted for in the pricing of the market for the initial six months of 2024. The AUD is bolstered by increased optimism regarding further Chinese stimulus measures and the conclusion of the Fed's rate hike cycle. On Tuesday, the RBA and FOMC Meeting Minutes will be the subject of discussion.
On Tuesday morning, the AUD/USD pair consolidates recent gains to near-new monthly highs during the Asian trading session. The US Dollar (USD) is subject to selling pressure due to reduced US Treasury yields and risk appetite, both of which provide support for the AUD/USD. In the interim, the US Dollar Index (DXY) reached its lowest level since late August, falling to 103.45. As of this writing, the AUD/USD pair is maintaining its downward position near 0.6557, having lost 0.06% on the day.
Commencing the United States Thanksgiving holiday, US equities opened marginally higher and US Treasury yields edged lower. In the absence of imminent economic data, focus will be on the FOMC meeting minutes, which are anticipated to be released late Tuesday. Indications concerning the trajectory of future policy rates and the amelioration of inflation may be encompassed within the report. Market participants have increased their wagers in anticipation that the Federal Reserve (Fed) will cease increasing interest rates in the first half of 2024, and have priced in a 100 basis point (bps) rate reduction.
Conversely, as investors gained more optimism regarding further Chinese stimulus measures and the conclusion of the Federal Reserve's rate hike cycle, commodity prices increased. As a result, the China-proxy Australian Dollar (AUD) appreciates. On Tuesday, Governor Michele Bullock of the Reserve Bank of Australia (RBA) is scheduled to deliver a speech. Subsequently, the minutes of the RBA's most recent meetings will be made public.
Although markets anticipate a reduction in interest rates in 2024, the RBA continues to endeavour to persuade them that rate hikes remain a possibility and that it is not contemplating a reduction in rates. A surprising hawkish tone in the statement could provide a tailwind for the AUD/USD pair by bolstering the AUD.
Market participants will attentively monitor the RBA Meeting Minutes and the speech of RBA Governor Michele Bullock in the near future. Tuesday will see the release of the Chicago Fed National Activity Index and US Existing Home Sales prior to the FOMC Meeting Minutes from its most recent gathering. In the vicinity of the AUD/USD pair, traders will identify trading opportunities based on these indicators.
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