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Aussie rebounds as US Fed faces “critical” test tonight

The Australian dollar rebounded from two-week lows overnight as markets looked ahead to a critical meeting of the US Federal Reserve.

The Fed’s decision, due at 4.00am AEST, will see the US central bank begin a massive reversal in policy after almost ten years of purchasing US government bonds to keep interest rates low.

Instead, the Fed will now slowly sell back these bonds as it attempts to exit from the largest monetary stimulus program in US history.

US bonds yields drifted lower overnight and supported the AUDUSD as the pair returned to one-week highs.

AUDJPY nears two-year highs

The AUDUSD climbed 0.6%.

The Aussie also rebounded from recent lows versus other key currencies, with the AUDEUR up from three-week lows while the AUDGBP climbed from two-month lows.

On the other hand, the AUDJPY neared two-year highs.


In addition to the Fed’s plans to reverse its quantitative easing program, the market will also be looking to the central bank’s projections for future interest rate hikes.

With the market assigning a 50% chance of an interest rate increase by the end of the year, the Fed’s forecasts could have a massive impact on the AUDUSD overnight.

Placing overnight orders is one way of capturing the potential volatility and achieving better FX rates. Speak to your Western Union Business Solutions representative for more information.

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