Australian dollar falls as markets get cautioushead of the Fed’s policy announcement.
On Wednesday, the Australian dollar (AUD) continues to decline against the US dollar (USD) for the second straight session. Later in the North American session, traders are anticipating a possible 25 basis point rate drop by the US Federal Reserve (Fed).
The greater chance that the RBA would decrease interest rates sooner puts downward pressure on the Australian dollar.
Additionally, traders’ growing wagers that the Reserve Bank of Australia (RBA) will lower interest rates sooner rather than later are hurting the AUD more than first anticipated. Future choices, however, will be base on facts, and the RBA’s strategy will be guide by changing risk assessments.
Federal Reserve would lower interest rates by 25 basis points on Wednesday.
Because of market hesitancy before the Fed’s announcement, the US dollar (USD) still strong. Markets are already nearly fully pricing in a quarter basis point decrease at the Fed’s December meeting, according to the CME FedWatch tool. The press conference and Summary of Economic Projections (dot-plot) that Fed Chair Jerome Powell will give following the meeting will also be widely watched by traders.
US Retail Sales up 0.7% MoM in November, up from a 0.5% gain in October, according to a data released by the US Census Bureau on Tuesday. In the meantime, after declining by 0.1%, the Retail Sales Control Group grew by 0.4%.
Daily Market Update:The Australian dollar is still weak due to market hesitancy before the Fed’s announcement.
Bank of Australia National (NAB) acknowledges February as a potential month, but they continue to predict the first rate decrease by the Reserve Bank of Australia at the May 2025 meeting. According to the NAB analysis, when the economy stabilizes, the unemployment rate predicted to peak at 4.3% and then decline to 4.2% by 2026. In terms of inflation, the Q4 trimmed mean inflation rate anticipated to be 0.6% on a quarterly basis. By late 2025, it anticipated to gradually ease to 2.7%.
After two months of growth, Australia’s Westpac Consumer Confidence dropped 2% to 92.8 points in December. In November, the index rose 5.3%. The US retail sales data for November, which is expected to be issued later in the North American session, will probably be watched by traders.
On Tuesday, Reuters reported from two sources that China is ready to should aim for about 5% economic growth in 2025. This decision comes after senior Chinese officials met last week at the Central Economic Work Conference. China is projected to meet the growth target, which is unchanged from this year.
In November, there was a net outflow of $45.7 billion from China’s capital markets, according to the State Administration of Foreign Exchange (SAFE), the country’s foreign exchange regulator. With $188.9 billion in receipts and $234.6 billion in payments for cross-border portfolio investments, this category experienced its biggest monthly deficit ever.
The preliminary S&P Global Composite Purchasing Managers Index (PMI) in the US increased from 54.9 to 56.6 in December. In the meantime, the Services PMI increased from 56.1 to 58.5. The PMI for Manufacturing fell to 48.3 in December, based on the previous value of 49.7.
US tariffs that threaten exports, Chinese officials, led by President Xi Jinping.
In the face of impending 10% US tariffs that threaten exports, Chinese officials, led by President Xi Jinping, have promised to increase the fiscal deficit target next year and refocus policy on consumption to strengthen the economy. Given that China is Australia’s biggest trading partner, the AUD has been under pressure to decline due to the lack of specific information on fiscal support.
In contrast to its previous 4.8% and anticipated 4.6% growth, China’s retail sales (YoY) increased 3.0% in November. In the meantime, industrial production rose by 5.4% annually, which was higher than the 5.3% increase predicted by the market.
