Cautiousness Hits the Market Again 

After stalling its recovery speed in the Asian session on Tuesday in the leadoff to the European open, the AUD/USD currency pair has been trading in the vicinity of 0.7200. the most recent fall in the Australian dollar comes on the backdrop of an increase in the demand for the US dollar as a cautious mood takes hold of the financial market again. The latest market caution was exemplified in the 0.25% decline in S&P 500 Futures which gained just a bit upward in the course of the Asian trading session.

AUD/USD price chart. Source TradingView

More reports of tougher measures regarding lockdown in China’s capital, Beijing, as a result of an uncontrolled increase of COVID cases as well as a sharp increase in the death toll in the city of Shanghai have posed a direct threat to all optimism of a quick reopening of activities in Chinese factories and financial market. The COVID situation in China and the impact of its lockdown on the supply chain network, as well as concerns about economic growth, equally weighed heavily on the sentiment of the market while it renewed the demand for the US dollar as a safe-haven asset.

In addition, the concern over the growth of the global economy was equally palpable in the midst of expectations for the Federal Reserve’s tough monetary policy; by so doing, the sentiment around the US dollar was effectively underpinned. It is evident over time that most investors would actually rather have the US dollar as they expect the central bank’s and Durable Good consumer confidence report to come in soon.

Inflation Restricts Bulls

Meanwhile, the Australian quarterly inflation report that was published on Wednesday has put some measure of restriction on the bullish traders of the Australian currency. Chief Analyst at FXStreet, Valeria Bednarik, stated that the yearly rate would have reached 4.6%, as expected. For the first quarter of this year, going up by up to 3.5% in the fourth quarter of 2021. 

The Reserve Bank of Australia’s Trimmed Mean central consumer price index is speculated to reach 3.4%, a high rate than the initial 2.6% and more than the higher end of the Reserve Bank of Australia’s aim for the first time in more than ten years. The data on inflation is going to be the major focus of the Reserve Bank of Australia’s next policy move.