The AUD/USD has been on an upward trend since Tuesday ahead of the Reserve Bank of Australia (RBA) interest rate decision for July. The pair was trading at 0.75306 on Monday.
Australia Inflation Concerns
The AUD/USD price increased on Monday after better-than-expected Australia retail sales for May. The retail sales rose 0.4% from 0.1% in April. However, Australian building approvals slipped 7.1% in the same month.
The RBA will conclude its two-day meeting on Tuesday. All eyes have shifted to the RBA to gauge whether it will be tapering its monetary policies earlier than expected.
In June, the Australian Central Bank decided to maintain its interest rate. It also kept its target level of yield on 3-year government bonds at a record low of 0.10%.
Analysts expect the RBA to maintain its current interest rates. The central bank had previously announced that they would consider tapering its interest rates amid stable inflation of around 2% to 3%. However, with the slow recovery in markets, the inflation growth is unlikely to happen before 2024.
In July, the bank is expected to consider the issue of further purchases of bonds. Some economists expect the RBA to reduce the amount of monthly bond purchases. The bank is expected to reduce its monthly bond purchases from the current A$ 100 billion to A$ 50 billion.
US Economic Stance
The US dollar slipped on Monday after hitting records high last Friday after the release of NFP data. Jobs growth spiked in June as most businesses reopened. According to the Labor Department, the US economy is on rapid uptrend.
Nonfarm payrolls for June were up 850,000 surpassing the 706,000 estimate. This was better than the previous 583,000 in May. However, unemployment rate missed the 5.6% estimate forecast and rose to 5.9%.
The AUD/USD pair will react to the minutes from the Federal Open Market Committee (FOMC) due on Wednesday. Investors are hoping to get clues on what the Fed is thinking on its interest rate decision and the country’s inflation growth.