August 11, 2022 02:58 AM ET
The AUD/USD currency pair was bought near the 0.7060 level on Thursday and climbed to a new daily high in early European trading. However, spot prices remain below the 0.7100 level and a two-month high reached after Wednesday's weaker US consumer inflation figures.
Prevailing risk appetite acts as a headwind for the safe-haven U.S. dollar and proves to be a key factor providing some support to the AUD/USD pair. The weaker-than-expected US interest rate report has pushed back expectations of more aggressive monetary tightening by the Fed and boosted investor confidence. This is reflected in generally positive sentiment in equity markets, which tends to benefit the risk-sensitive Australian dollar.
However, rising concerns about a global economic slowdown and tensions between the U.S. and China over Taiwan could put the brakes on optimism. In addition, skeptical comments overnight from several Federal Reserve officials should help limit deeper losses in the greenback and limit gains in the AUD/USD pair.
This in turn urges bullish traders to be cautious and position themselves for further appreciation moves, at least for now.
Chicago Fed President Charles Evans indicated that inflation remains unacceptably high and expects the Fed to raise rates by 3.25% to 3.50% by year-end and 3.75% to 4.00% by the end of next year.
Minneapolis Fed President Neel Kashkari added that the Fed is far from declaring inflation defeated and recommended a rate of 3.9% by the end of this year in its June economic forecasts.