- The AUD/USD is projected to drop to around 0.6500 as the US dollar gains strength from a trade agreement with the EU.
- The US plans to lower tariffs on imports from the EU to 15%.
- Market participants are looking forward to upcoming data from the US, along with Australia’s second quarter CPI and updates on the Federal Reserve’s policy.
During Monday’s European trading session, the AUD/USD pair experienced a decline of 0.6%, nearing the psychological level of 0.6500. Following the weekend’s announcement of a trade deal between the US and the European Union, the US dollar saw increased demand, putting pressure on the Australian dollar.
Details from the trade agreement reveal that the US has decreased the tariff rate on imports from Brussels to 15%.
Overall market sentiment appears positive for riskier assets as the US-EU trade deal alleviates concerns about disruptions in global trade. Consequently, S&P 500 futures have risen in European trading. However, the US dollar’s strength has reduced demand for assets considered risk-sensitive.
The US Dollar Index (DXY), which measures the greenback’s value against six major currencies, has surged to approximately 98.30, marking its highest point in a week.
Looking ahead, investors are keenly awaiting a variety of US economic indicators, notably the personal consumption expenditure price index (PCE) for June and second quarter GDP data. The Federal Reserve’s monetary policy announcement on Wednesday is expected to be a key highlight.
From Australia, investors are also anticipating the release of Consumer Price Index (CPI) data for the second quarter on Wednesday. It’s expected that this data will show a moderate increase in price pressures. If price pressure growth is limited, it may lead to speculation that the Reserve Bank of Australia (RBA) could consider cutting interest rates next month.
