After Reserve Bank of Australia (RBA) Governor Philip Lowe said dovish things, the AUD/USD currency pair has stayed above 0.6400. The head of the central bank also said, “We are thinking about how rising rates and inflation will affect household budgets.”

As expected, the central bank raised the policy rate from 2.60 per cent to 2.85 per cent on Tuesday and lowered its growth predictions for 2022 and the next two years. The Aussie fell briefly toward 0.6400 after the RBA said something, but it got a new wave of buying when the US dollar lost strength because of a Chinese risk surge.

More extensive indexes went up because of rumours on social media that regulators were about to give up on covid-Zero, which was not valid. The risk-averse Australian dollar went up when China’s markets and the Caixin Manufacturing PMI were upbeat (49.2 vs 49.0 predicted).

Before Wednesday’s Fed’s rate hike announcement, the markets were changing their long positions in the US dollar. Even though there is a new downtrend, the dollar’s weakness helps the pair stay above 0.6400.

Later in the day, investors will watch the US ISM Manufacturing PMI and the price-paid component for new dollar trades. The mood on Wall Street will also be imperative.

Conclusion

Australia’s Building Permits data is due on Wednesday and will be used to help trade. The Fed’s decision this week is the most significant risk of the week.