- AUD/USD trades at fresh six-day highs on Tuesday.
- US Dollar Index remains depressed near multi-month lows.
- Wall Street’s main indexes look to open modestly higher.
After registering small losses on Monday, the AUD/USD pair gained traction on Tuesday and climbed to its highest level in six days at 0.7812. As of writing, the pair was up 0.5% on the day at 0.7803.
USD struggles to find demand as market mood improves
Earlier in the day, the Reserve Bank of Australia’s (RBA) Meeting Minutes showed that the RBA will not be raising interest rates until actual inflation stays sustainably in the 2-3% target band. The bank further acknowledged that disruptions to global supply chains were more persistent than initially realised and noted that this factor was adding to inflation.
Nevertheless, the USD’s market valuation remained the primary driver of AUD/USD’s movements on Tuesday. The risk-positive market environment made it difficult for the greenback to find demand and the US Dollar Index (DXY) dropped to its lowest level since late February at 89.69 before recovering modestly. At the time of press, the DXY was down 0.42% at 89.82.
The data from the US showed that Housing Starts declined by 9.5% in April but this reading was largely ignored by market participants.
In the meantime, Wall Street’s main indexes look to start the day in the positive territory. In case risk flows continue to dominate the financial markets in the second half of the day, the USD could stay under pressure and allow AUD/USD to inch higher.
On Wednesday, the Westpac Consumer Confidence Index and the first-quarter Wage Price Index data will be featured in the Australian economic docket.