The Australian dollar is lower on Friday after posting sharp gains a day earlier. In the European session, AUD/USD is trading at 0.6637, down 0.61% on the day. The Aussie has been swinging wildly in a week that included the US presidential election and central bank rate decisions in Australia and the US.
The dust hasn’t yet settled from Donald Trump’s decisive election win on Tuesday. The US dollar has gained ground on the election news, on concerns that Trump’s trade policy could lead to tariffs and trade wars which could boost inflation and slow the pace of interest rate cuts.
RBA’s Bullock: Trump impact on Australian inflation unclear
What will a Trump presidency mean for Australia’s economy? Reserve Bank of Australia Governor Bullock couldn’t answer that question at an appearance before a Senate committee on Thursday. Bullock said a Trump presidency could send inflation in different directions and that the RBA had not changed its forecast that inflation won’t fall sustainably within the target band until 2026. The RBA has become an outlier among major central banks as it is yet to start cutting rates in response to lower inflation. The central bank held rates at 4.35% earlier this week, a move that was widely expected.
Overshadowed by the dramatic US election, the Federal Reserve lowered the benchmark rate by 25-basis points on Wednesday. The decision was widely expected as the Fed had telegraphed its intentions well before the decision. This follows the jumbo 50-bp cut in September, which was largely driven by weak job numbers which spooked the markets on fears that the US economy was fast deteriorating. These concerns appear to have been exaggerated and with the Fed confident that it can steer the economy to a soft landing, the Fed would like to gradually cut rates in modest increments of 25 basis points.
AUD/USD Technical
- AUD/USD is testing support at 0.6644. Below, there is support at 0.6600
- There is resistance at 0.6724 and 0.6768
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Kenny Fisher
Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.
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