The Australian dollar (AUD) retraced from its weekly high against the American dollar (USD) due to the latter’s recovery from weekly, monthly, and quarter-end flows. As a result, the AUD/USD is trading below its opening price by 0.43%. Meanwhile, Wall Street is set to finish the week with gains, and the upcoming US inflation data could cement the case for a pause in the Fed’s tightening cycle.
USD Bolstered by End-of-Month Flows
The USD’s bolstered recovery is due to the end-of-month flows. This is because market participants often rebalance their portfolios at the end of each month, which can affect the value of currencies. In this case, the USD received a boost from these flows, which contributed to the AUD/USD retracement.
Wall Street Set to Finish Week with Gains
Despite the USD’s gains, Wall Street is set to finish the week with gains. This is due to several factors, including the positive earnings reports from various companies and the possibility of a pause in the Fed’s tightening cycle. These factors have contributed to a positive sentiment in the stock market, which has resulted in gains for the week.
US Inflation Data May Affect Fed’s Tightening Cycle
The upcoming US inflation data could affect the Fed’s tightening cycle. If the data shows that inflation is higher than expected, it may prompt the Fed to continue with its current pace of rate hikes. On the other hand, if the data shows that inflation is lower than expected, it may lead the Fed to pause its tightening cycle. This uncertainty around the data is contributing to the volatility in the markets, which can affect currencies like the AUD/USD.
In conclusion, the AUD/USD retraced from its weekly high due to the USD’s bolstered recovery from end-of-month flows. While Wall Street is set to finish the week with gains, the upcoming US inflation data may affect the Fed’s tightening cycle, which can result in volatility in the markets. As always, investors should remain vigilant and keep an eye on the latest developments to make informed decisions.