Key points:
- The AUDUSD currency pair rallied as the US dollar weakened.
- In addition, the higher risk sentiment boosted the currency pair.
- Will the rally higher continue? Read on to find out.
The AUDUSD currency pair rallied higher today, driven by the US dollar’s weakness after the Bank of England announced its intervention in the long-dated UK bonds market. As a result, the pair benefitted from the dollar’s overall weakness and recouped some of its recent losses.
Investor risk sentiment soared today as the leading central banks, such as the Bank of England, could take drastic measures to intervene in the Forex and bond markets to stabilize markets, despite working hard to fight inflation.
Also read: Pros And Cons of MetaTrader.
Last week, we saw the Bank of Japan intervene in the forex markets to prop up the Japanese yen, whose value has been eroded significantly due to the interest rate difference between Japan and the United States.
Japan is the only remaining G7 country that has not raised interest rates to fight rising inflation simply because its inflation has been much lower than its peers. However, the situation is changing as Japan’s inflation has recently started rising.
The Australian dollar has weakened against the US dollar, along with other major currencies. Still, the risk sentient shifted today when it became clear that central banks would not hesitate to intervene in the markets if needed.
Many now expect the US Federal Reserve and other central banks, including the Reserve Bank of Australia, to take measures to stabilize markets if needed. Moreover, today’s move by the Bank of England demonstrated that central banks would intervene, a sentiment that was not clear before.
Therefore, even as many experts and analysts warn of a looming global recession if central banks continue hiking interest rates, market participants can now see that most central banks will not hesitate to act to protect the financial markets.
This is why the market’s risk sentiment surged today as investors became bolder and embraced riskier assets and currencies, including the euro and the Australian dollar. However, it is unclear if the Aussie’s current rally will be sustained. Only time will tell.
*This is not investment advice.
AUDUSD price chart.
The AUDUSD currency pair was trading up 19.3 pips (0.30%) today as the Aussie rallied against the US dollar.
