- AUD/USD merges less than 0.6300 as investors are waiting for the US consumer price index data for February.
- The US dollar remained under pressure amid the deepening of the American economic risks.
- The trade war between the United States has reduced China from the Australian dollar’s attractiveness.
The AUD/USD pair is trading in a lower tight range than the main level of 0.6300 in the European session on Wednesday. The Australian pair is integrating while investors are waiting for the consumer price index data (USA) for the month of February, which will be published at 12:30 GMT.
Investors are waiting for inflation data in the United States to obtain new signals about whether the Fed Reserve Bank will reduce interest rates at the May meeting. At the next week’s policy meeting, the Federal Reserve will certainly maintain fixed interest rates in the range of 4.25 % -4.50 %. According to the CME Fedwatch tool, there is a 42 % opportunity for the central bank to reduce interest rates in May, and significantly increase from 10.4 % saw it a month ago.
The CPI report in the United States is expected to appear that the main annual inflation increased at a slower rate by 2.9 %, compared to an increase of 3 % seen in January. In the same period, the basic consumer price index – which excludes flying food and energy prices – is expected to be mixed to 3.2 % of the previous version of 3.3 %.
Before US inflation data, the US dollar index (DXY) is marginally higher than its four -month low at 103.35. The US dollar (USD) remained in the event of wrapped, as investors worry about US economic expectations under President Donald Trump. On Tuesday, US Trade Minister Howard Lootnick comments indicated that Trump’s policies deserve fears that they will lead to recession.
Meanwhile, the upper trend in the Australian dollar (AUD) is still surrounded by fears that the US -Chinese trade war can lead to a sharp decrease in Australian business activity, knowing that Australia relies heavily on exports to China. So far, the United States has imposed a 20 % tariff on imports from China.
Questions and answers in US dollars
The USD (USD) is the official currency of the United States of America, and a “reality” currency for a large number of other countries where there is a circulating alongside local notes. It is the most trading currency in the world, as it represents more than 88 % of the rotation of global foreign currencies, or on average $ 6.6 trillion in transactions per day, according to data from 2022. In the aftermath of World War II, the United States took over the British pound the world reserves. For most of its history, the US dollar was backed by gold, even the Bretton Woods agreement in 1971 when the golden standard went.
The most important individual factor that affects the value of the US dollar is the monetary policy, which is formed by the Federal Reserve (Fed). The Federal Reserve has two states: to achieve price stability (control of control) and enhance full employment. Its primary performance to achieve these two goals is to adjust interest rates. When prices rise very quickly and inflation is 2 % higher than the Federal Reserve goal, the Federal Reserve will raise rates, which helps the value of the dollar. When inflation decreases to less than 2 % or the unemployment rate is very high, the Federal Reserve may reduce interest rates, which weighs to green.
In maximum situations, the Federal Reserve can also print more dollars and quantitative mitigation (QE). QE is the process that the Federal Reserve increases significantly from the flow of credit in a suspended financial system. It is a measure of the non -standard policy used when the credit is dry because banks will not lend to each other (for fear of failing to pay the opposite end). It is the last resort when it is unlikely to achieve interest rates simply the necessary result. The Federal Reserve is the preferred to combat the credit crisis that occurred during the great financial crisis in 2008. It includes the printing of the Federal Reserve more dollars and their use to buy US government bonds mostly from financial institutions. QE usually leads to the weakest US dollar.
The quantitative tightening (QT) is the opposite process in which the Federal Reserve stops buying bonds from financial institutions and does not invest the manager from the bonds he holds in new purchases. It is usually positive for the US dollar.
