Australian Dollar rebounds vs USD; Trump's tariffs and US-Iran tensions cap gains

AUD/USD edges higher as Australia’s flash PMIs reaffirm RBA rate hike bets and lift the Aussie.
Energy-driven inflation fears fuel hawkish Fed expectations and benefit the USD amid Iran risks.
Traders look to the US PMIs for some impetus as the focus shifts to the FOMC meeting next week.

Haresh Menghani FXStreet

The AUD/USD pair attracts some buyers during the Asian session on Friday and reverses a part of the previous day's slide back to the weekly trough. The mixed fundamental backdrop, however, warrants caution before confirming that the corrective slide from a nearly five-week high, around the 0.7025 area, touched on Tuesday has run its course and positioning for the resumption of the uptrend from the June low.

The US Dollar (USD) preserves its strong weekly gains to the highest level since June 26 and turns out to be a key factor acting as a headwind for the AUD/USD pair. A further escalation of tensions between the US and Iran remains supportive of the recent rise in crude oil prices to the highest level since June 11, which has been fueling inflationary concerns and bolstering US Federal Reserve (Fed) rate hike bets.

Moreover, US President Donald Trump's new trade tariffs temper investors' appetite for riskier assets and further underpin the safe-haven Greenback. According to a notice released by the office of US Trade Representative Jamieson Greer, the Trump administration is set to impose sweeping new tariffs of between 10% and 12.5% on 60 of the top trading partners, covering nearly all of the country's imports.

The Australian Dollar (AUD), however, draws support from the better-than-expected release of domestic flash PMIs, signaling a second consecutive month of expansion for the broader private sector. This follows Thursday's upbeat Australian employment details and reaffirms bets for more interest rate hikes by the Reserve Bank of Australia (RBA), which helps limit the downside for the AUD/USD pair.

Traders now look forward to flash US PMIs, due later during the early North American session. Apart from this, incoming geopolitical headlines will play a key role in influencing the USD price dynamics. Meanwhile, the focus will remain glued to the highly-anticipated two-day FOMC monetary policy meeting next week, which should determine the near-term trajectory for the buck and the AUD/USD pair.

Economic Indicator

S&P Global Composite PMI

The Composite Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging private-business activity in Australia for both the manufacturing and services sectors. The data is derived from surveys to senior executives. Each response is weighted according to the size of the company and its contribution to total manufacturing or services output accounted for by the sub-sector to which that company belongs. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the Australian private economy is generally expanding, a bullish sign for the Australian Dollar (AUD). Meanwhile, a reading below 50 signals that activity is generally declining, which is seen as bearish for AUD.

AUD/USD sticks to positive bias above 0.7100; lacks bullish conviction

AUD/USD trades with a positive bias for the second straight day, holding above 0.7100 in the Asian session on Friday as softer US bond yields keep US Dollar bulls on the back foot. Furthermore, hawkish RBA Governor Bullock's comments boost rate hike bets and support the Aussie. However, the Fed's hawkish outlook, along with geopolitical uncertainties, limits USD losses and caps the pair.

USD/JPY approaches 158.00 as Japanese Yen resumes decline

USD/JPY is resuming its upside in the European session on Friday, refreshing two-week highs and nearing 158.00. The Japanese Yen extends losses, despite the Bank of Japan's (BoJ) expected rate hike to 1.25% and hawkish Governor Ueda's comments, as two surprise dissents against the rate hike weigh on it.

Gold keeps the bid tone in place; still below $4,400

Gold adds to the optimism seen in the second half of the week, trading with decent gains just below the $4,400 mark per troy ounce on Friday. The precious metal’s advance finds traction in declining crude oil prices and fresh selling pressure on the US Dollar.

Why altcoin season isn't coming back — and what stole its capital

If, after two years of being frozen in ice, Katara and Sokka woke you up to the crypto market, it would seem like 100 years have passed. With Bitcoin soaring to record highs just over a year ago, everyone expected a routine altcoin season, where investors take profits from the top crypto to chase higher returns in altcoins.

BoJ Recap: Not as hawkish as expected

The BoJ raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks. Governor Kazuo Ueda said the policy phase had changed.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.