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Forex Market: AUD/USD trades near 1 1/2-month trough, Powell’s reappointment fuels 2022 rate hike expectations

AUD/USD was hovering just above a fresh 1 1/2-month low on Tuesday, as Federal Reserve Chair Jerome Powell’s reappointment reinforced expectations of an interest rate hike in 2022.

“The decision removes one source of uncertainty for financial markets and favours policy continuity at the Fed,” MUFG currency analyst Lee Hardman wrote in an investor note.

“We expect US yields and the US dollar to remain under upward pressure in the near term while US activity and inflation data is surprising to the upside.”

Ulrich Leuchtmann, Commerzbank’s head of FX and commodity research, said that the decision underpinned the US Dollar, as it reflected US President Joe Biden’s respect for the Federal Reserve’s independence from government.

In contrast, last week Reserve Bank of Australia Governor Philip Lowe dismissed market pricing for a rate hike in 2022, as recent macro data and projections did not warrant such a decision.

Still, higher iron ore prices were limiting the Aussie’s losses.

As of 11:14 GMT on Tuesday AUD/USD was inching down 0.07% to trade at 0.7219. Earlier in the trading session, the Forex pair slipped as low as 0.7211, which has been its weakest level since October 1st (0.7192). The major currency pair has retreated 4.00% so far in November, following a 4.03% gain in October.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled -19.48 basis points (-0.1948%) as of 9:15 GMT on Tuesday, down from -13.7 basis points on November 22nd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7239
R1 – 0.7258
R2 – 0.7292
R3 – 0.7311
R4 – 0.7329

S1 – 0.7205
S2 – 0.7187
S3 – 0.7153
S4 – 0.7119 is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

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