The recent market developments have significantly impacted the Australian dollar (AUD), as it faces a myriad of challenges. Key factors include the Federal Reserve's rate-cutting cycle, the Reserve Bank of Australia's (RBA) dovish stance, China's economic struggles, and ongoing geopolitical risks. Amidst these, the AUD/USD pair experienced a rebound from its lowest level since April 2020. This recovery was largely driven by reports suggesting a gradual reduction of Trump-era tariffs, which buoyed investor sentiment and consequently weighed on the US dollar (USD).
However, while the AUD/USD pair showed resilience, the EUR/USD pair encountered difficulties, plummeting to a 26-month low before attempting a modest recovery. The precarious state of the Euro was mirrored in gold prices, which traded defensively and reversed four consecutive days of declines. This backdrop of fluctuating currency values was accompanied by an improved USD, which prompted a reassessment of the Federal Reserve's interest rate policy.
Market participants now speculate that the Fed may implement only a single rate cut or possibly refrain from cutting rates altogether within the current year. This speculation has been fueled by strong Nonfarm Payrolls data released on Friday, which contributed to the ongoing reevaluation of monetary policy expectations.
In contrast, the cryptocurrency market faced a turbulent start to the week. Bitcoin prices fell below $90,600 for the first time in 24 days, as the sector experienced a 5% decline on Monday. This downturn resulted in over $148 billion being wiped off the aggregate market capitalization of cryptocurrencies. The upcoming US Consumer Price Index (CPI) report has traders on edge, as Bitcoin's price remains particularly sensitive to economic data releases.