The Australian Dollar (AUD) experienced a modest upward move, approaching the psychological level at 0.6700 on Friday after a retracement from losses in the previous session. The AUD/USD pair finds support for its upward movement amid elevated market speculation regarding potential rate cuts by the US Federal Reserve (Fed) in March and May. However, the pair faced a downward shift following better-than-expected inflation data from the United States (US).
Australia’s Monthly Consumer Price Index for October and November showed a marginal decrease, suggesting that Q4 2023 headline inflation is likely to fall below the Reserve Bank of Australia‘s (RBA) annual forecast of 4.5%. The Australian Bureau of Statistics (ABS) job vacancies data, indicating a decline for six consecutive quarters, aligns with easing pressures in the labor market, implying no further interest rate hikes from the RBA in February.
Contrasting signals were seen in Australia’s positive economic indicators, including an increase in November’s Retail Sales and the widening of December’s Trade Surplus. Despite subdued inflation data, these positive economic signs may influence the RBA to refrain from implementing monetary policy easing.
Chinese economic indicators also played a role, with the Consumer Price Index (YoY) in December showing a decrease of 0.3%, contrary to expectations. However, the Chinese Trade Balance in USD rose, exports grew, and the yearly Imports in CNY increased, indicating improved economic activities and supporting the Australian Dollar.
The US Dollar Index (DXY) is positioned to build on recent gains after positive US inflation data on Thursday. The Consumer Price Index (CPI) surged to 3.4% YoY in December, exceeding expectations. The market now awaits the US Producer Price Index (PPI) data for December and a speech by Federal Reserve member Neel Kashkari, providing further context and potential influence on market sentiment.
Traders will closely monitor the evolving economic landscape and central bank actions for cues on the future direction of the AUD/USD pair.
