The Australian Dollar (AUD) is experiencing a decline for the second consecutive session on Tuesday, with the AUD/USD pair losing ground due to a modest rebound in the US Dollar (USD). This shift could be attributed to increased risk aversion following the attempted assassination of former US President Donald Trump on Saturday. Investors are also eagerly awaiting the release of US June Retail Sales data for further insights.
Meanwhile, the third plenum of the Chinese Communist Party’s 20th National Congress is ongoing from July 15 to 18. Standard Chartered predicts rate cuts from the People’s Bank of China in response to decelerated GDP growth in Q2. China is facing uneven growth drivers and escalating trade tensions, with new tariffs being imposed on Chinese electric vehicles by the US and EU.
Despite these challenges, the AUD/USD pair remains close to its peak levels as speculation grows that the Reserve Bank of Australia (RBA) may delay joining the global rate-cutting cycle or even consider raising interest rates. This is supported by persistently high inflation in Australia, prompting the RBA to maintain a hawkish stance. On the other hand, cooling US inflation has strengthened expectations of a Federal Reserve rate cut in September.
Market indicators suggest that the US Dollar (USD) may face limitations in its upward movement as speculation mounts over potential rate cuts by the US Federal Reserve. According to CME Group’s FedWatch Tool, there is an 85.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 71.0% the previous week.
In summary, the Australian Dollar’s decline is influenced by various factors such as risk aversion, global economic conditions, and central bank policies. The AUD/USD pair’s movement will continue to be closely monitored amidst ongoing developments in both domestic and international markets.