Australian dollar benefits from positive market sentiment

The Australian dollar has risen against the US dollar on Monday due to positive market sentiment, supporting commodity currencies like the Aussie more than safe-havens like the US dollar. S&P Global’s data shows the US Composite PMI is higher and in expansionary territory compared to Australian counterparts, reflecting the positive market mood.

The Australian Dollar makes up losses suffered in the wake of ratings agency S&P Global’s data showing purchasing managers in key sectors, particularly manufacturing, held a more optimistic outlook for the future compared to those in Australia.

The Australian Dollar is expected to face headwinds as inflation is predicted to fall, reducing pressure on the Reserve Bank of Australia to raise interest rates. Lower interest rates attract less foreign capital inflows, which tends to have a negative impact on currencies.

Quarterly inflation figures for Australia are out on Wednesday, July 26, providing valuable intelligence for Australian Dollar traders attempting to model the future course of interest rates in Australia. The CPI for Australia in the second quarter is estimated to show a 6.2% YoY rise compared to the 7.0% in Q1.

Strong Australian labor market data may influence the inflation figures, potentially leading to higher-than-anticipated results. If that is the case, the AUD may gain after the release of the CPI data.