Following yesterday’s sharp rise in the USD caused by the release of the minutes of the US Fed’s meeting of 26-27 April, on Thursday the AUD and the pair AUD/USD started to decline, trading at the three - month lows.
According to the minutes the interest rate increase in June is quite possible. It has been said that if economic statistics in Q2 will show improvements of economic growth and labor market and inflation rate will approach the target level of 2%, it will be appropriate to raise interest rate in June.
The Australian received additional momentum for decline after today’s release of the poor data on Australian labor market.
It became known that the share of labor force in the total population fell in April (64.8% against 64.9% in March), new jobs in April were at the level of +10800 against the forecast of +12000 and +25700 in March. Unemployment rate in April remained at the level of 5.7%. The number of man-hours worked has reduced in all sectors of the Australian economy (-17.9 million), which shows the decline in employment rate.
The Australian dollar is still under pressure from the decline in prices of metals and iron ore, the main export items of the Australian economy. Rising expectations of the interest rate increase by the US Fed in June has a negative impact on investor’s risk appetite putting pressure on the stock market and commodity currencies.
After the reduction of interest rates in Australia at the beginning of this month to 1.75%, the pair AUD/USD has dropped by 400 points at the moment. In view of the possibility of another lowering in the interest rate, the pair AUD/USD will continue to decline.
Therefore, within a month or even earlier, the pair AUD/USD may reach the level of 0.7000.
Today at (15:15 GMT+2), Mr. Stanley Fischer US Fed Vice Chairman in New York will give a speech. If Mr. Fisher supports a rate hike in June, it could trigger further growth in the USD.