AUD/USD trades around the 0.7000 area on Monday, holding near recent highs after recovering from last week’s decline.
The Australian Dollar (AUD) remains supported by limited US Dollar (USD) demand, although rising geopolitical risks and slightly higher US Treasury yields are restricting the pair’s upside
In China, the People’s Bank of China (PBOC) left its benchmark lending rates unchanged for a fourteenth consecutive month. The one-year Loan Prime Rate, which influences most corporate and household loans, remained at 3.00%, while the five-year rate, commonly used to price mortgages, was maintained at 3.50%. The expected decision had a limited immediate impact on the Aussie, while the absence of additional monetary stimulus highlighted concerns about China’s uneven economic recovery.
On the United States (US) side, Treasury yields ticked higher, offering some support to the Greenback. However, the softer inflation outlook has helped cool expectations of aggressive Federal Reserve (Fed) interest rate increases, limiting the US Dollar’s recovery. Bond strategists continue to expect shorter-term yields to ease as markets reduce their rate hike bets.