The Australian Dollar (AUD) is ending Friday’s session with minor losses of 0.22%, ahead of a packed economic calendar in the United States (US) dominated by inflation data. The greenback, on the other hand, is finishing the week with solid gains of 0.56% due to a mixed market sentiment. At the time of writing, the AUD/USD is trading at 0.6918 after reaching a high of 0.6960.
Wall Street’s Mixed Performance
Wall Street ended the day with a mixed performance, with the S&P 500 and the Dow Jones registering gains of 0.22% and 0.50% respectively, reaching 4,090.46 and 33,869.27. However, the Nasdaq 100 dipped 0.61% to 11,718.12. Data from the US economic calendar showed an improvement in financial conditions, with the University of Michigan’s Consumer Sentiment exceeding expectations and reaching 66.4.
The projected inflation rate for the upcoming year has increased from 3.9%, as reported in January’s final reading, to 4.2%. On the other hand, the estimated inflation rate for a five-year span remains unchanged at 2.9%. The AUD/USD reversed its trend and dropped from around 0.6949 to the 0.6919 area after being ready to test the day’s high.
A Headwind for the AUD/USD
The US Dollar Index (DXY), which tracks the performance of the American Dollar (USD) against a basket of six currencies, finished the week at around 103.585, up 0.58%, creating a headwind for the AUD/USD. On the Australian front, the rise in Australian bond yields capped the fall of the Australian Dollar (AUD) against the greenback. Market participants ramped up expectations for additional interest rate increases by the Reserve Bank of Australia (RBA), which hiked rates by 25 bps on Tuesday and stated that further tightening would be necessary after lifting rates to the 3.35% threshold.
What to Watch in the Week Ahead
The upcoming week in Australia will feature two speeches by Reserve Bank of Australia Governor Philip Lowe and employment data. In the US, the calendar will release inflation data, and retail sales, and the regional Federal Reserve Bank will reveal manufacturing conditions.
Conclusion:
In conclusion, the Australian Dollar (AUD) experienced a calm Friday session, finishing with minimal losses of 0.22% ahead of a busy week in the United States economic calendar. A mixed market sentiment helped bolster the greenback, which had solid gains of 0.56%. The AUD/USD finished the week at 0.6918 after reaching a high of 0.6960. The US Dollar Index (DXY) was a headwind for the AUD/USD, closing the week at 103.585, up 0.58%. Meanwhile, Australian bond yields rose, limiting the Australian Dollar’s fall against the greenback. Expectations for additional interest rate increases by the Reserve Bank of Australia also added to the AUD’s stability. The upcoming week will see the release of important economic data in both Australia and the US, including inflation data, retail sales, and manufacturing conditions. The market will keep a close eye on these data releases, as they will provide insights into the direction of the global economy and the currency markets.
