- AUD/USD recovers vertically from 0.6490 as the US Dollar turns subdued.
- The market participants hope that the Fed will announce a rate cut in June.
- Upbeat Caixin Manufacturing PMI improves the appeal of the Australian Dollar.
The AUD/USD pair stages a V-shaped recovery from 0.6490, fueled by investor optimism surrounding potential interest rate reductions by the Federal Reserve (Fed) in the upcoming June policy meeting. The Australian currency sees a robust rebound as the US Dollar faces downward pressure.
Global market dynamics reveal a mixed picture during the European session, with S&P 500 futures experiencing a dip, while currencies associated with risk appetite outperform against the US Dollar. The US Dollar Index, gauging the currency’s strength against six counterparts, slightly retreats to 104.00.
Persistent market expectations of Fed rate cuts in June are anchored by the annual core inflation data, which posted the slowest growth at 2.8% in several years. Despite this, the Federal Reserve remains cautious about hastening the shift from its restrictive policy stance, seeking more confidence in the inflation trajectory toward the 2% target.
Fed policymakers express a need for further data analysis to determine whether the elevated inflation observed in January was an isolated incident or if sustained price pressures are resurfacing.
Looking ahead, market participants will turn their attention to the release of the United States Manufacturing PMI data for February, scheduled for 15:00 GMT.
Simultaneously, the Australian Dollar gains strength following the positive February Caixin Manufacturing PMI, surprising with a rise to 50.9 compared to expectations of 50.6 and the previous reading of 50.8. The Australian economy’s close ties with China, its leading trading partner, contribute to the Aussie’s attractiveness amid improved economic prospects in the region.
