The Australian Dollar sinks, making a 2-year low overnight as demand for US Dollars surges in the face of growing risks to global economic growth.
China’s zero-case Covid-19 policy has crippled activities in the world’s second-largest economy, promoting recession anxiety as monetary policies settle in to tackle inflation. Shanghai reported its first case of the latest strongly communicable sub-variant of Covid-19, BA.5 omicron, tightening restrictions. The aftermath is that supply would be scarce for some time while maintaining the price pressures. The ease of activities in China has caused a tumble in the metal price of iron ore, Australia’s major export since April, pushing the AUD to sink. So the future is not suitable for AUD in the market, though it performed well earlier.
Fed Chair Jerome Powell recently cleared the air in his interviews, stating that the bank is strictly working on regaining price stability, which may come at a cost to economic growth.
Australian CPI, which will be released on 27th July, is a crucial number for RBA’s 2nd August monetary policy committee meeting deliberations. However, should the RBA decide on an outsized hike, it may not impact AUD/USD.
Looking on the bright side, the cascaded currency will elevate the local Australian economy, especially if the feared global recession kicks off.
Remember, earlier today, it was reported that the US dollar continues to rise.