Australian Dollar

The Australian Dollar exhibits impressive performance early on Tuesday, following an unexpected decision by the Reserve Bank of Australia (RBA) to raise its policy rate by 25 basis points to 4.1%.

Meanwhile, the US Dollar faces challenges in finding demand as market participants increasingly anticipate the Federal Reserve (Fed) maintaining its key rate at the upcoming meeting. Key economic events to watch include Euro area Retail Sales and the IBD/TIPP Economic Optimism Index from the US.

Contrary to market expectations, the RBA has once again chosen to increase its policy rate during their second consecutive meeting. The RBA emphasized in its policy statement that it remains committed to achieving the inflation target, and acknowledged the potential need for further monetary policy tightening.

As a result, AUD/USD experienced significant gains during Asian trading hours, with the currency pair rising more than 0.5% above 0.6650 for the day.

Yesterday’s ISM Services PMI report indicated a slowdown in the growth of the service sector throughout May. Furthermore, the report highlighted a contraction in sector employment, accompanied by a decrease in input inflation.

Consequently, the US Dollar Index (DXY) faced renewed downward pressure, relinquishing its gains to end the day unchanged. DXY continued to remain slightly below 104.00 during the European morning, while the benchmark 10-year US Treasury bond yield consolidated losses from Monday, settling around 3.7%.

Following a late recovery on Monday, EUR/USD closed the day above 1.0700. Early on Tuesday, the currency pair fluctuates within a narrow range due to limited fresh catalysts.

European Central Bank (ECB) President Christine Lagarde, speaking before the European Parliament in Brussels, reiterated that there was no conclusive evidence suggesting that underlying inflation had peaked.

GBP/USD managed to recover most of its losses during the American session on Monday, and in the European session, it remained steady slightly below 1.2450.

The price of gold benefited from declining US yields on Monday, leading to modest daily gains. At the start of Tuesday, XAU/USD exhibits minimal fluctuations within a narrow range near $1,960.

During Monday’s trading, USD/JPY breached the 140.00 level and continued its decline towards 139.00 during the Asian session on Tuesday. Bank of Japan Governor Kazuo Ueda stated earlier in the day that the Quantitative and Qualitative Monetary Easing (QQE) policy would persist until the inflation target is achieved.

Bitcoin faced substantial selling pressure, resulting in a loss of over 5% on Monday. On Tuesday, BTC/USD consolidated its losses near $25,800. Ethereum remains precariously close to $1,800 during the European morning after experiencing a 4% decline on Monday.


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