The Australian dollar has surged to a nine-month high, buoyed by improving global trade sentiment and cautious remarks from the Reserve Bank of Australia (RBA). According to IG Markets analyst Tony Sycamore, the AUD/USD pair concluded the previous week at US65.66¢, marking a 0.9 per cent increase, after peaking at US66.24¢ earlier in the week. This rally was initially sparked by a US-Japan trade agreement, which bolstered risk appetite among investors.
Sycamore noted that RBA Governor Michele Bullock’s measured tone during a business lunch in Sydney further propelled the Aussie’s ascent. Bullock downplayed the rise in employment in the June labour force report, stating it was not unexpected. She also suggested that monthly inflation data indicated that the inflation rate might not decline as rapidly as projected in May. These comments led traders to reduce their expectations of further interest rate cuts by the RBA, diminishing the likelihood of a third 25 basis point reduction before year-end.
Further boosting the Australian dollar was news of a US-EU trade pact, which caps most tariffs at 15 per cent and includes a pledge from the EU to invest $US600 billion in the US. The Aussie briefly traded at US65.86¢ following this announcement. Reports of a potential 90-day extension of the US-China tariff truce also contributed to the bullish sentiment. This truce would facilitate the resumption of trade talks in Stockholm.
Sycamore cautions that further appreciation of the Australian dollar will depend on upcoming economic data and global events. He emphasizes that tariff-related headlines, as well as inflation and jobs data from the US, will play a crucial role in determining whether the AUD/USD pair can sustain its gains. Domestically, the June quarter inflation figures, due on Wednesday, represent a significant factor influencing RBA expectations.
