A Good Past Week Got Extended

It is a good start of the week for the AUD/USD currency pair as it regained grounds it lost at an early to a low of three weeks, and it was able to trade in neutral territories, slightly under the mid-0.7400 levels as it headed into the European session.

The steep retracement slope of the past week was successfully extended by the pair from the 0.7660 zones, which happens to be the highest point it had been since last June. The pair has some considerable selling in the course of the early trading session on Monday. 

AUD/USD price chart. Source TradingView

The consumer inflation rates from China, as well as its factory issues, grew more rapidly than was envisaged in the month of March as it suspended hopes that there would be any easing of the aggressive monetary policy by the Chinese central bank the People’s Bank of China. This became an obstruction in the path of the Australian dollar that has close proximity to China as there are a lot of bullish stances underlying the US dollar.

Fed Policy, the War, and More

The conviction of the market that the US Federal Reserve will further tighten the country’s monetary policy became stronger. Traders expect a more rapid pace of implementation in order to combat inflation. As there are concerns that the increasing price of commodities is going to add pressure to the readily high consumer inflation, the monetary policy expectation joins to push the Treasury bond yields up to new heights it had not been in many years.

Aside from the above, the global weakness surrounding stock markets also helped the US dollar to stand above board as a safe-haven asset close to its highest point since last May. It touched that point on Friday.

With the background of the hawkish position of the US Federal Reserve, investors toned down their appetite for assets they consider to be risk-sensitive as they worry about the financial and economic implications of the war going on in Ukraine. In part to the latest reports, Russian troops kept on their assaults in the eastern part of Ukraine as they bombed the airport at Dnipro.

Statements coming from the Ministry of Defense in Russia have it that the military headquarters of the battalion at Dnipro was neutralized by highly precise missiles. 

The conglomeration of all these factors brought down the AUD/USD currency pair to depths it had not been at from the 22nd of March, even though the Australian dollar benefitted from the increased cost of commodities.