Will the Australian dollar resume its uptrend?

A report, by Credit Agricole Bank, contains expectations for the price movement of the Australian dollar in light of the monetary policy rhetoric that has been adopted by the interest rate statement by RBA and the statements of the central bank’s Chair following the announcement of keeping rates unchanged last week.

Within the framework of the report, Credit Agricole discussed the impact of keeping the interest rate unchanged by the RBA and the preference of policymakers to avoid reducing the interest rate at the current June meeting, suggesting that this decision may come in the interest of the AUD/USD and AUD’s pair with its New Zealand’s counterpart through intense buying operations for the pairs.

The report indicated that the decision announced by the Central Bank last week led to a decline in speculation about an interest rate cut soon, but also “led some to value an overall interest rate hike,” suggesting that “the position of the Chief Economist at the Bank of New Zealand on monetary policy – which was… Less supportive of a rate hike – could lead to heavy AUD/NZD buying.”

Rhetoric supporting stabilizing interest

The Reserve Bank of Australia kept interest rates unchanged at its June meeting with the central bank adopting a supportive speech for tightening policy and favouring raised rates, dashing expectations of a rate cut this year.

This was also among the factors that raised speculation among investors who are focused on profiting from interest spreads that the central bank might resort to raising rates instead of lowering them.

The report also spoke about the economic conditions in New Zealand with the aim of demonstrating the possibility of a decline in the New Zealand dollar against its Australian counterpart. The report also stated that the New Zealand economy was emerging from recession, “however, the Governor of the New Zealand Central Bank was less supportive of raising interest rates or keeping them at the same current levels, a language that greatly affected the markets.”

The markets’ reaction to these developments on the monetary policy level was that investors in the forex markets preferred to buy the AUS/NZD pair, with the Australian dollar gaining more strength against its American counterpart, especially after the release of US retail sales readings that highlighted a decline in consumer spending, which led to markets continuing to price in the Fed’s rate cut.

US retail sales recorded an increase of 0.1% last May, compared to the previous reading, which recorded an increase of -0.2%, which was lower than expectations that indicated the possibility of sales achieving a greater increase of 0.2%.

The reading of US retail sales, excluding car sales, declined to -0.1% last May compared to the previous reading that recorded the same figure, but this was lower than market expectations that indicated the possibility of a rise of 0.2%.

US inflation

The report also addressed the US inflation data expected to be released next Friday and what could happen in the price movement of the pairs concerned with this analysis, saying: “The release of personal consumption expenditures data will be an important event that the markets are anticipating” next Friday.

According to the report, “Any decline in personal consumption expenditure levels is expected to provide further upward momentum for both the Australian and New Zealand dollars.”


The Credit Agricole report concluded that it supports a positive outlook for the movement of the AUD/USD and NZD/USD pairs based on the monetary policy stance of the Reserve Bank of Australia, the markets’ reaction to the US economic data, and interest expectations for the pairs. The bank also suggested that personal consumption expenditures data may present a difficult test for the couple.

The US dollar ended Tuesday’s trading in an upward trend with a batch of statements coming out of the Fed’s corridors, as a member of the Federal Reserve Board of Governors confirmed that the matter regarding reducing interest depends on new developments in the US economy.

A member of the US Federal Reserve Board of Governors, said on Tuesday that the central bank is on the path to cutting rates if the performance of the US economy matches her expectations, but she did not provide any details about her expectations for the timing when the Fed might take this action.

The Fed official added: “Our monetary policy is in a good position at the present time to take the necessary measures in response to any changes that may occur in the future outlook for the economy,” stressing that “with significant progress being made in terms of reducing inflation, while labor market conditions are gradually declining.” It will be appropriate at some point to reduce the level of monetary policy (lower interest rates) in order to achieve the healthy balance necessary for the functioning of the economy.

The Fed official also pointed out that “the timing of this measure will depend on the extent of developments the economy shows and the signals these developments contain about the future outlook of the economy and the balance of risks.”

The Dollar Index, DXY, which measures the performance of the US currency against a basket of major currencies, rose to 105.61 points compared to the last daily close, which recorded 105.47 points. The index fell to its lowest level on the current trading day at 105.37 points, compared to the lowest level recorded at 105.78 points.