**Australian Dollar Drops to Three-Month Lows Amid Economic Pressures**
*Adapted and expanded from TradingView news article, original reporting by an unnamed TradingView staff writer. Additional research by OpenAI’s language model.*
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## Introduction
The Australian dollar (AUD), often referred to as the “Aussie,” is sliding lower in foreign exchange markets, reaching its weakest value in three months against the US dollar (USD) as of late June 2024. This extended decline follows a series of economic data releases and shifting monetary policy expectations. We’ll discuss the primary drivers pushing the AUD down, the current macroeconomic landscape, and the potential outlook for the Australian currency.
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## Recent Performance of the Australian Dollar
– **Three-Month Low:** As of the last week in June 2024, the AUD/USD currency pair dropped below the 0.6600 level for the first time since March.
– **Downward Momentum:** The current depreciation marks several consecutive weeks of losses for the Australian dollar, which closed below technical support levels and saw increased selling pressure from traders.
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## Key Factors Behind the AUD’s Weakness
### 1. Divergence in Central Bank Policies
– **Reserve Bank of Australia (RBA):**
– The RBA has maintained its cash rate at 4.35% since its last adjustment in late 2023.
– Although inflation remains above the bank’s 2-3% target range, recent economic data indicates progress toward lowering price pressures in the Australian economy.
– Market participants now expect the RBA to keep interest rates steady, with some even pricing in a rate cut before the end of 2024.
– **US Federal Reserve:**
– In contrast, the US Federal Reserve has kept its benchmark rate higher for longer, with policymakers reaffirming their commitment to fighting inflation.
– Strong US economic data, including robust consumer spending and labor market figures, support the Fed’s hawkish stance.
– Investors continue to favor the US dollar, particularly as yields on US Treasuries remain elevated.
### 2. Weak Domestic Economic Data
– **Retail Sales:**
– Recent figures showed that Australian retail sales grew only 0.4% in May, below the forecast of 0.6%.
– This suggests subdued consumer demand amid persistent cost-of-living pressures and high interest rates.
– **Employment Data:**
– Australia’s job market has cooled in early 2024, with unemployment rising from historic lows to 4%.
– While still relatively strong, the softening labor data raises concerns about future wage growth and domestic demand.
– **Inflation:**
– The most recent Consumer Price Index (CPI) showed annual inflation slowing from 3.6% in April to 3.4% in May.
– Although inflation remains above the RBA’s upper target, the downward trend reduces the likelihood of further rate hikes.
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