Sydney Harbour with Sydney opera house at night, Australia

The AUD/USD price pulled back on Monday after US inflation surge and new lockdowns in Australia. The pair fell 0.45% below its highest point last week and is trading at 0.7585.

US Economic Sentiment

The US economy is expected to be on its feet earlier than anticipated. This was after a bipartisan group of senators agreed to a $1 trillion infrastructure deal. The funds will be used to facilitate key projects like roads, airports, and bridges.

The funds will drive the total stimulus spending this year to more than $3.8 trillion. This was after US recorded a jump in personal consumption expenditure (PCE). The PCE rose by 3.9% in May, the biggest gain since April 1992.

The core PCE price index reflects the rapid rate of economic expansion and hence is the Fed’s favorite inflation figure. US retail sales have also been on an upward trend as the country’s inflation jumped to its highest level in a decade.

The deal was signed a few days after the Federal Reserve announced its interest rate decision. The Fed maintained its monetary policy. The Fed however shifted its tone, by signaling an earlier than expected tapering of its monetary policies.

The AUD/USD pair will react to US nonfarm payrolls data to be released later this week. Analysts expect the unemployment rates to decline as jobs increase. the pair will also react to the latest consumer confidence to be released on Tuesday.

Australia Lockdowns

The AUD/USD pair has been declining due to the rising number of COVID-19 cases in Australia. The cases in the country have been surging hence pushing the government to install lockdown restrictions in Sydney.

Sydney will be on lockdown for the next two weeks. This was after the government eased lockdown restrictions in Melbourne. People have been ordered to stay indoors and to only step out for essential work.

Analysts expect the cases to increase since the Delta variant is more infectious and resistant to vaccines. Australia is struggling to acquire vaccines from Pfizer and Moderna. However, the vaccination rollout in the country is lower since only 4% of the country’s population has been vaccinated.

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