AUDUSD Analysis – December 18, 2023

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AUDUSD Analysis – Recently, the Australian dollar’s value increased, surpassing the $0.67 mark. This rise marks its highest level since July.  The reason behind this surge is mainly the weakening of the US dollar. This change came about after the Federal Reserve, a key financial institution in the United States, hinted at reducing interest rates three times in the coming year. In their latest update, known as the “dot plot”, the Federal Open Market Committee (FOMC) members shared their predictions. They expect the funds rate, an important rate for loans and savings, to reach 4.6% by the end of next year. This rate is significantly lower than the previously anticipated 5.1%.

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At the same time, the head of the Reserve Bank of Australia, Governor Bullock, spoke last week about their cautious approach towards economic changes. He emphasized the importance of analyzing new data carefully. Governor Bullock reassured that Australia is keeping up well in its efforts to control inflation, a problem affecting prices worldwide. The financial markets are now speculating that the Reserve Bank of Australia might stop increasing interest rates. They believe this decision aligns with the recent weakening of key economic indicators in Australia. However, these markets also predict that Australia might take longer to bring inflation back to desired levels compared to other major economies.