AUD/USD Pops Like Champagne Cork on Hawkish RBA and Upbeat Chinese Data!

The AUD/USD pair is trading with a positive bias on Tuesday and finds support from various factors. The hawkish stance from the Reserve Bank of Australia (RBA) and the upbeat Chinese economic data are providing a boost to the Australian Dollar. Additionally, a positive risk tone is weighing on the safe-haven USD, further aiding the risk-sensitive Aussie. However, the rising US bond yields may cap any further gains for the major and limit the USD losses.

During the early part of the European session, the AUD/USD pair gained fresh momentum and is currently trading around the 0.6735-0.6740 area, up almost 0.60% for the day. The pair is being supported by the RBA minutes of the April meeting, which have a hawkish tone. The minutes reveal that the board members discussed the possibility of a 25 bps rate hike in April, as inflation remained high and the labour market was tight. Alongside this, the Chinese economy grew by 4.5% in Q1, surpassing estimates and the 2.9% growth in the previous quarter.

The upbeat data also shows that Industrial Production increased to 3.9% in March from 2.4% in February, and Retail Sales rose by 10.6% last month, which was higher than expected. Additionally, Fixed Asset Investment grew by 5.1% in March versus 5.5% in February, adding to the positive sentiment around the world’s second-largest economy’s post-COVID recovery. This helps support a generally positive tone in equity markets, which attracts fresh selling around the safe-haven US Dollar and benefits the risk-sensitive Aussie.

However, speculations regarding the Federal Reserve’s interest rate policies could limit the downside for the USD and act as a headwind for the AUD/USD pair. The markets are currently pricing in a greater chance of another 25 bps lift-off at the next FOMC policy meeting in May, which could result in higher US Treasury bond yields, warranting caution before placing bullish bets around the major.

In the early North American session, market participants will look forward to the US housing market data, namely Building Permits and Housing Starts, for some impetus. This, along with the broader risk sentiment and the US bond yields, will influence the USD price dynamics and allow traders to grab short-term opportunities around the AUD/USD pair.

If you enjoyed reading about the AUD/USD pair’s latest movements, be sure to check out our other articles on Forex trading, market analysis, and investment strategies on our website. Stay ahead of the curve and gain valuable insights to make informed decisions.