Australian Dollar Extends Slide
2022.11.21 10:31
The Australian dollar has posted losses over three straight days and is sharply lower on Monday. In the North American session, is trading at 0.6610, down 0.96%.
RBA Shifts Gears
AUD/USD Technical
- AUD/USD is testing support at 0.6609. Below, there is support at 0.6541
- There is resistance at 0.6704 and 0.6772
Although the Reserve Bank of Australia has shifted its course and slowed down its rate of hikes, is this too soon given that inflation is still rising?The RBA has slowed down after a run of 50-bp increases and has now issued two 25-bp increases in a row.The RBA was the first major central bank to make the change, and it is widely anticipated that the Federal Reserve will ease to a 50-bp increase at its meeting in December.
Smaller rate increases are intended to lessen the impact on the economy and alleviate the pain experienced by businesses and households as interest rates continue to rise.At the same time, the RBA has become the most hated person in the public eye, so it will have to keep raising interest rates until it sees a peak in inflation.Even though the RBA is gradually lowering interest rates, Governor Lowe is employing the jawbone strategy to dispel any notion that the central bank is ceasing to tighten.
Lowe has stated that the bank would not hesitate to resume excessive rate hikes if necessary to accomplish this goal.
The RBA is closely monitoring wage growth, which reached a nine-year high of 3.1% in Q3.If wages continue to rise at their current rate, the Reserve Bank of Australia is concerned about the possibility of a wage-price spiral, which would significantly complicate its efforts to reduce inflation.
Hopes for a Fed U-turn on rate policy have been dashed by the steady stream of hawkish statements from Fed members. This has lowered risk appetite.After suffering a setback as a result of the inflation report earlier this month, the has recovered.
Despite the fact that risk sentiment has increased when inflation falls, the Fed has long maintained that a few reports indicating weaker inflation do not constitute a trend.Risk appetite is likely to rise once more, hurting the US dollar, if November’s inflation data are lower than expected.Although some Fed members have stated that a move of 75 basis points is still possible, the markets have priced in a 50-bp increase for next month.
