Australian Dollar Bounces Back Amidst Domestic Equity Market Gains

On Monday, the Australian Dollar (AUD) staged a recovery from intraday losses, entering positive territory, buoyed by advancements in the domestic equity market. The ASX 200 Index witnessed upward movement during the week’s opening session, particularly fueled by a surge in tech stocks. Nevertheless, the resilience of the steady US Dollar (USD) may pose a potential constraint on the AUD/USD pair’s advancement.

Last week, the Australian Dollar faced hurdles following the release of unchanged Final Retail Sales and downbeat Trade Balance data from Australia. Notably, Australia reported its smallest Trade Surplus in five months for February, partly attributed to a decline in iron ore exports.

Meanwhile, the US Dollar Index (DXY) strengthened on the back of higher US Treasury yields, driven by the release of robust Nonfarm Payrolls data from the United States (US) on Friday. The improved performance of the US labor market has diminished the likelihood of a rate cut by the Federal Reserve (Fed) in June. According to the CME FedWatch Tool, the probability of a rate cut has decreased to 46.1%. Traders are eagerly awaiting the release of US Consumer Price Index data for March scheduled on Wednesday, which could further influence market dynamics.

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