Make no mistake, the bullish AUD/USD currency pair enjoyed a significant Asian session on Monday, breaking to a multi-day high. Helping to fuel this increase is the current, weaker U.S. dollar. New entrants continue to join the fray as more analysts raise the ante on when and in what amounts the Federal Reserve will begin cutting rates.
The AUD/USD has been soaring — a reflection of high-level optimism on the strength of the Australian dollar. Market participants have been encouraged by early signs of inflation beginning to ease in the United States. Market analysts argue that these changes are leading to a sea change in traders’ views about what the Fed will do to monetary policy in the future.
As the U.S. dollar weakens, it has recently constituted good news for the Australian dollar. Such a change in mood has fueled increased AUD/USD trading activity. That duo has hit their stride and kept the (relatively) rapid pace all session.
“AUD/USD builds on its steady Asian session move up amid a weaker USD.” – www.fxstreet.com/currencies/audusd
The Australian dollar is on a positive run at the moment. Many underlying dynamics might oppose its continued expansion relative to the USD conversion rate. A growing key headwind comes from a shift to a softer risk tone across global markets. Among those factors that have investors scared straight, U.S. fiscal policies, escalated trade tensions with the U.S.-China trade war, and a series of other geopolitical risks have all sounded warning bells.
That’s made even worse by the Reserve Bank of Australia’s (RBA) dovish forward guidance. Market expectations are already shifting toward possible rate cuts from the Fed. Countering this, the less aggressive monetary policy approach foreshadowed by the RBA may cap any rise in the Australian dollar.
Analysts on all sides are transfixed by these moves. What they’re realizing is that even though the AUD/USD has put on fantastic gains, outside forces can promptly reverse this direction.