AUD/USD hovers around 0.6950s after failures at 0.7000 ahead of RBA Lowe

• The AUD/USD begins the week on the right foot, gaining 0.25%.
• An upbeat market mood due to China’s covid news and the US weighing lifting restrictions on China’s increased appetite for riskier assets.
• Fed speakers reiterated the US central bank’s commitment to tackle inflation down.

The Australian dollar edges up in the North American session, even though a bank holiday in the US kept trading conditions thin due to a lack of volume in the FX markets. At 0.6952, the AUD/USD bounces off daily lows at 0.6915 after reaching a daily high near 0.7000.

Risk-on impulse boosts the AUD

In an upbeat mood, US equity futures closed earlier due to a holiday. That, alongside China’s Covid-19 crisis getting under control and US President Biden weighing removing some trading tariffs to China, was cheered by investors, as shown by climbing AUD/USD prices.

Nevertheless, despite the AUD/USD jump near the 0.7000 area, falling Iron Ore prices capped the rally. Newswires over the weekend reported that China wants to set up a central group to control Iron Ore imports by the end of the year. If that’s achieved, AUD/USD traders should be aware that some of Australia’s 697 million tonnes of exports would take a hit, and with it, the Aussie dollar.

Elsewhere, Fed speakers commenced crossing wires. Throughout the weekend, Fed member Christopher Waller backed a July 75 bps rate hike mentioning that inflation needs to be brought down, regardless of the cause. Meanwhile, Cleveland’s Fed President Loretta Mester noted that inflation would not reach the Fed’s 2% target while mentioning that although the Fed’s Summary of Economic Projections (SEP) foresees the US economy slowing down, she said that she’s not “predicting a recession.”

On Tuesday, the Australian economic calendar will feature the Reserve Bank of Australia (RBA) Governor Philip Lowe speaking. The central bank will also release minutes of its June meeting, at which it decided to hike by a surprisingly large 50 basis points to 0.85%, and markets are wagering on a similar-sized move for July as well.

The US economic docket will feature Existing Home Sales for May, and further Fed speakers, with Richmond Fed President Thomas Barkin, crossing wires

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