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Aussie gains ahead of RBA rate review expected to hold steady

7/4/2017, 10:40:41 AMBasics of Trading
Aussie gains ahead of RBA rate review expected to hold steady

The Aussie gained on Tuesday in Asia with the latest review of interest rates ahead.

AUD/USD traded at 0.7670, up 0.12% before the decision expected to hold at a a record low 1.50%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, eased 0.07% to 95.88. USD/JPY fell 0.11% to 113.26.

Australia also reported retail sales for May with a gain of 0.6% month-on-month, beating the expected 0.2% rise.

The dollar rose against a basket of global currencies on Monday, buoyed by manufacturing data that topped analysts’ forecasts, adding to expectations that the Federal Reserve would hike its benchmark rate later this year.

Fresh on the heels of suffering its worst quarterly performance in seven years, the dollar regained ground against its rivals, after data showed manufacturing activity surged to a three-year high in June, pointing to solid economic growth.

The Institute for Supply Management said its manufacturing index rose to 57.8 last month from 54.9 in May. The measure now stands at its highest level since August 2014.

Trading volumes, however, remained thin during the U.S. session, as investors seemed hesitant to initiate large positions ahead of the fourth of July public holiday in the U.S. on Tuesday.

The pound and euro were the two main laggards against the greenback, after both currencies rose to multi-month highs last week, following bullish comments from leaders of the Bank of England and the European Central Bank.

The dip in sterling below $1.30 against the dollar, comes against the backdrop of concerns raised by analysts that sterling could yet fall further in the months to come, as investors appear overly optimistic that the Bank of England will hike rates in the near future.

"The market seems to be taking the opposite view to ours that activity matters less than inflation in monetary policy decisions," says analyst Silvia Ardagna at Goldman Sachs’ London office. "Perhaps this is because activity is decelerating from a high level and growth remains above trend, while inflation is above the policy target."