In the near future, the Reserve Bank of Australia – RBA is anticipated to increase the cash rate by a further 50 basis points, which is just a little bit more than the 40 basis points money market pricing. As such, an increase of 50 basis points is probably going to trigger the Australian Dollar to spike.
The July 5th deadline assessment of the US Treasury regarding US tariffs on USD 34 billion in China imports will also draw attention as July marks four years since the start of the trade war between the United States and China.
If the US decides to remove certain tariffs on Chinese imports, this might act as a positive impetus for the Chinese Yuan and, subsequently, the Australian Dollar. Making life easier for American firms and consumers who have to pay the levies is among the reasons for lowering tariffs, according to US Treasury Secretary Yellen.
Consequently, with the US midterm elections just a few weeks ahead and the present backdrop of the rampant inflation that has tightened earnings, this has triggered further attention on Chinese tariffs from the Trump Administration.
Nevertheless, there are some disagreements within Biden’s administration, as the Trade Chief of the President asserted that the US has great power because of the tariffs on China and that there will not be a big immediate impact on inflation should these tariffs be eliminated. Although the President’s Trade Chief’s remarks may be accurate, if there are indications that certain China tariffs would be lifted, the Australian Dollar could potentially rise as bond yields keep falling.
The Australian Dollar is probably going to see peculiar effects in the near future. Ultimately, the prospects of the Australian Dollar are prone to be affected by broad risk on-off sentiment. The psychological level of 0.6900 is one to monitor over topside resistance, at 0.6850–60, while support is at 0.6762 year-to-date.
