AUD/USD eyes a correction from US session highs

The AUD/USD pair’s performance is flat in the first hour of Asian trade on Friday as it moves in on extremes of a broadening formation on the charts, but fundamentally, the stock markets on Wall Street and the softer US dollar have been a significant catalyst, so, the pair rallied to 0.6937 from a session low of 0.6858.

Almost twenty-four hours earlier; on Wednesday, the RBA Governor Philip Lowe emphasized higher rates with the Australian government bond futures also started to price in higher rates. Yields on most government bonds up about 10 basis points since the start of the week.

Global stock markets are also supportive of the Aussie and are on track for a fifth straight session of gains. The Euro was up in and the US dollar down in choppy trading after the European Central Bank raised interest rates for the first time in more than a decade as it tries to combat inflation. The ECB rose by 50 bps and it also introduced a bond protection plan, called the Transmission Protection Instrument (TPI), that is designed to cap borrowing costs across the region.

Wall Street’s main indexes climbed on Thursday boosted by a late-afternoon rally and gains in heavyweight growth stocks, including Tesla. The tech-heavy Nasdaq added 1.4% to lead the gains while the S&P 500 closed at its highest level since June 9. The Dow Jones Industrial Average climbed 0.5%.