AUD/USD: Approaches 0.6700 as USD Index extends downside

The AUD/USD pair remains in a downward trend as the price continues to rise. Although the AUD/USD climbed to its highest level in almost four weeks, surpassing 0.6700, it later dropped to 0.6650 due to the stronger US dollar overpowering the initial boost from the hawkish Reserve Bank of Australia. The pair's upward momentum stalled after a four-day consecutive rise, facing challenges from a resilient US dollar and market concerns about the global economic outlook.

In a recent statement, RBA Governor Lowe emphasized that while preserving gains in the labor market is important, the board will not tolerate persistently high inflation. This hawkish stance has led to speculation in the interest rate market of another rate hike at the July meeting, which was previously not anticipated.

First-quarter data from Australia showed lower-than-expected growth of 0.2% QoQ, compared to the market consensus of 0.3%. The annual growth rate also slowed to 2.3%, the slowest since Q1 2021. Despite this data and the gloomy global outlook, the RBA made it clear that its primary focus is to control inflation, which is still below the target. Trade data for Australia is scheduled to be released on Thursday.

Although China reported weak trade data for May, with a 7.5% drop in exports (higher than the expected 1.8% decline) and a 4.5% decrease in imports (less than the anticipated 8.0% decrease), the AUD/USD still managed to climb above 0.6700 during the European session. However, the pair corrected its course due to a stronger US dollar during the American session, supported by higher US yields. The likelihood of a rate hike at the next FOMC meeting has slightly increased, and investors are reducing their expectations of rate cuts by the end of the year. Attention is now focused on the upcoming US Jobless Claims data on Thursday, as well as the Consumer Price Index and the FOMC meeting scheduled for next week.

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