Bloomberg—The AUDUSD currency pair recently increased, reaching around $0.655. This is the highest it’s been in over three months. The rise is partly due to Michele Bullock, the Governor of the Reserve Bank of Australia, highlighting some important issues.
AUDUSD Fundamental Analysis – Key Economic Insights
Bullock pointed out that the demand within Australia is pushing up prices, meaning things are getting more expensive. This situation needs a strong reaction, particularly through adjusting interest rates.
Interest rates are like the cost of borrowing money. When these rates go up, it generally slows down how much people spend and borrow, helping to control inflation or the rate at which prices rise. The market is now expecting a 60% chance that the rates will be increased to 4.6% next year. This expectation is higher than before, as it was only 40%.
Not too long ago, in November, the Reserve Bank of Australia decided to raise the cash rate by 25 basis points, bringing it to 4.35%. A basis point is a small unit used in finance to describe changes in interest rates or other financial percentages. This decision was made because the prices of goods and services rose faster than they had thought they would a few months back.
Additionally, the report includes information about Australia’s manufacturing and service sectors. Both sectors declined in November due to weaker demand, meaning fewer people wanted or could afford their products and services.
Investors are closely monitoring the United States’ economic situation outside of Australia. They’re particularly interested in the Federal Reserve’s monetary policy, which involves decisions that affect the US economy, like setting interest rates. The US shows mixed economic data, making it hard to predict what will happen next.