AUD/USD Struggles at 0.6900: What’s Next as RBA Hawks & US Dollar Bulls Clash?

On early Tuesday, the AUD/USD pair experienced minor losses near 0.6900, despite the Reserve Bank of Australia's.

Arslan Butt•Tuesday, February 21, 2023•1 min read

On early Tuesday, the AUD/USD pair experienced minor losses near 0.6900, despite the Reserve Bank of Australia’s (RBA) hawkish Minutes Statement and positive Australian activity figures. The cause could be due to the market’s risk-averse nature and the US dollar’s strong performance on Monday, with the DXY index gaining slightly near 104.00.

US Treasury bond rates followed the US dollar’s lead and continue to remain high, currently hovering around 3.86%. Meanwhile, futures for the S&P 500 dropped 0.40% throughout the trading session, reaching 4,070 at the day’s low.

The RBA Meeting Minutes suggested that the monetary policy board was debating whether to raise rates by 25 bps or 50 bps but did not discuss pausing rate increases. However, the Minutes Statement cast doubt on the regularity of hawkish actions, which weighed on the AUD/USD pair.

Although the initial S&P Global PMI results for Australia in February were more optimistic than predicted, only the Manufacturing PMI was above the neutral threshold of 50.0.

On a different note, the US and China’s trading of accusations over a balloon shooting on Monday, as well as Japan’s concern over North Korea’s missile tests, could help maintain the US dollar’s safe-haven position.

Investors should pay attention to risk triggers and the Fed Minutes for specific instructions, especially regarding the next several PMIs, particularly those from the United States. If US data continues its recent trend of generating positive surprises and/or if the FOMC Minutes show a hawkish attitude, the AUD/USD pair will continue to trend down.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.