AUSTRALIAN DOLLAR FORECAST: BULLISH
- The Australian Dollar refuses to lie down as progress sentiment sways
- The unfold of latest Covid variants weigh, however inexperienced shoots could be showing
- Iron ore and commodity markets look like recalibrating. Will AUD/USD rise?
The Australian Greenback completed final week testing the November 2020 lows of 0.69913. This week it has bounced again as constructive threat sentiment returned. It additionally seems that some positioning unwinding could have occurred after the RBA assembly on Tuesday.
The unfold of the Omicron variant of Covid-19 had been weighing on markets as a result of uncertainty of how transmissible it’s and the influence on human well being in comparison with earlier strains.
Early indications seem to level towards a extremely transmissible pressure that won’t result in as many hospitalisations as earlier variants. This attitude is but to be verified.
In any case, market response has been that of much less concern for the financial impacts than it had been beforehand.
The RBA left financial coverage unchanged on Tuesday as anticipated. The tone within the put up assembly assertion mirrored endurance on the board’s behalf, because the financial institution doesn’t face the identical inflationary pressures that many different central banks are experiencing.
This leaves the RBA with scope to keep up their present financial coverage stance till their subsequent assembly in February 2022.
The market had been anticipating this comparatively dovish stance and it seems that it could have been caught brief. The newest CFTC knowledge exhibits speculative positions in AUD/USD to be skewed this fashion.
There was additionally some progress constructive information from China because the PBOC reduce the reserve ratio requirement (RRR) for banks by 50 foundation factors. This has seen the iron ore value edge up this week.
For the reason that final FOMC, the Fed has turned remarkedly hawkish of their commentary. There are excessive expectations for an acceleration within the tempo of tapering and for fee hikes within the US subsequent yr. Ought to expectations not be met, volatility would possibly improve once more.
Wanting forward for the Aussie, subsequent week will see enterprise and client confidence numbers early within the week earlier than the unemployment knowledge on Thursday.
AUD/USD AND IRON ORE (SGX)
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the feedback part beneath or @DanMcCathyFX on Twitter