The Australian dollar has come under pressure in recent weeks as the US dollar has strengthened. The AUD/USD pair has fallen from around 0.80 in early February to around 0.75 in early April. The strength of the US dollar has been the main driver of this move, as the currency has benefited from rising bond yields and a stronger economy.
US Inflation and Consumer Sentiment
One factor that has helped to cool down the US dollar is the recent slowdown in inflation. In March, the US Consumer Price Index rose by only 0.2%, which was below expectations. This has led some investors to believe that the Federal Reserve may not need to raise interest rates as quickly as previously thought, which has put pressure on the US dollar.
Another factor that has contributed to the US dollar’s weakness is deteriorating consumer sentiment. The University of Michigan’s Consumer Sentiment Index fell to 84.9 in March, which was below expectations. This suggests that consumers are becoming more cautious about the economy and could lead to slower growth in the coming months.
RBA’s Decision on Rates
The Reserve Bank of Australia (RBA) is expected to keep rates on hold at its next meeting in April. According to analysts at TD Securities, the RBA is likely to maintain its current policy stance due to the uncertainty surrounding the global economy and the ongoing impact of the COVID-19 pandemic.
This decision is likely to cause subdued trading in the near term, as investors wait for further guidance from the RBA. If the RBA does decide to keep rates on hold, this could put further pressure on the AUD/USD pair, as the interest rate differential between Australia and the US would remain in favor of the US dollar.
AUD/USD Price Analysis
Looking at the price action in the AUD/USD pair, it is clear that the currency pair has been in a downtrend since early February. The pair has been making lower highs and lower lows, which is a classic sign of a downtrend.
However, in the near term, the pair is likely to remain subdued as investors wait for further guidance from the RBA. The next key level to watch in the pair is around 0.74, which is a key support level that has held up the pair in the past.
In conclusion, the AUD/USD pair has fallen due to the strength of the US dollar, which has benefited from rising bond yields and a stronger economy. The recent slowdown in US inflation and deteriorating consumer sentiment have put some pressure on the US dollar, but the currency remains strong overall.
The RBA is expected to keep rates on hold at its next meeting, which could lead to subdued trading in the near term. However, if the RBA does decide to keep rates on hold, this could put further pressure on the AUD/USD pair.