Australian Dollar Weaker Ahead of the New Week Amid a Sharp Dollar Resurgence

Last week, the Australian Dollar (AUD) suffered as a result of the US Dollar’s (USD) spectacular surge in response to growing recessionary concerns. Last Wednesday, the Federal Reserve raised its target range by 50 basis points to 4.25%–4.50%. Despite a slightly softer US CPI the day before, the shift was generally predicted.

Despite a 64K job increase in November, Australia’s unemployment rate remains at multi-generational lows of 3.4%. This is in addition to a growing trade surplus from the previous week.

Going into the year’s close, the rest of the underlying picture is a little ambiguous due to disappointing construction approvals and retail sales figures. Rate increases by the Reserve Bank of Australia (RBA) seem to have affected those numbers.

Although real GDP is less spectacular when adjusted for inflation, nominal GDP is still strong at 5.9% annually.

After ECB President Christine Lagarde and Fed Chair Jerome Powell reminded markets that they are dedicated to battling inflation rather than focused on supporting economic development, the large changes of last week came about.

The two biggest central banks in the world have changed their attitude from earlier decades when they supported growth at the risk of excessive inflation. Price stability is essential for an economy’s long-term success. However, the market doesn’t seem to be entirely aware of this.

Australian Dollar to Be Driven by Risk Sentiment This Week

There are no noteworthy Australian data releases this week, while the US will primarily see secondary economic measures. Due to this, the AUD/USD exchange rate may be susceptible to shifts in risk sentiment, especially in the wake of any statements from the RBA and the Fed.