Australian dollar falls after the release of mixed domestic statistics on Thursday.

The Australian Dollar (AUD) falls for the third day in a row versus the US Dollar (USD), with the pair holding near two-year lows following local economic data and China’s CPI inflation report released on Thursday. Traders are now looking ahead to Friday’s US Nonfarm Payroll (NFP) report for more policy direction information.

Australia’s trade surplus increased to 7,079 million in November, exceeding the forecast 5,750 million and the prior reading of 5,670 million (updated from 5,953 million). Exports rose 4.8% month on month (MoM) in November, up from 3.5% (revised from 3.6%) in October. Meanwhile, imports increased by 1.7% month on month in November, up from 0% (revised from 0.1%) the prior month.

Retail Sales in Australia, a crucial measure of consumer spending, rose 0.8% month on month in November, up from 0.5% in October (raised from 0.6%). However, the number fell short of market forecasts, which were for a 1.0% increase.

China’s Consumer Price Index increased by 0.1% year on year in December, compared to the prior 0.2% increase.

The Australian dollar faces hurdles as data from China’s Consumer Price Index (CPI) indicates rising deflationary threats. In December, annual inflation rose by 0.1%, slightly less than the 0.2% increase in November, which was consistent with market forecasts. On a monthly (MoM) basis CPI inflation remained unchanged at 0% in December, aligning with estimates, following a 0.6% decline in November. Any change in Chinese economic conditions could impact the Australian markets as both nations are close trading partners.

Daily Market Update:Australian Dollar extends losses due to increased hawkish sentiment surrounding Fed.

The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, holds its position near 109.00 at the time of writing.

The Greenback received support from hawkish Federal Open Market Committee (FOMC) Meeting Minutes and concerns about tariff plans by the incoming Trump administration. The US Dollar strengthened as the 10-year yield on US Treasury bonds rose to near 4.73% in the previous session, currently standing at 4.67%, while the 30-year approached 4.93%. The ADP Employment Change increased by 122K in December, but below market expectations of 140K. The US ISM Services PMI increased to 54.1 in November, up from 52.1, exceeding market expectations of 53.3. The Prices Paid Index. Which reflects inflation, rose significantly to 64.4 from 58.2, while the Employment Index dipped slightly to 51.4 from 51.5.

The FOMC Minutes from the December meeting showed that most participants supported a 25 basis point cut but remained cautious, taking into account potential trade and immigration policy changes that could prolong elevated inflation. According to Bloomberg, Fed officials should exercise caution various policy choices as a result of inconsistent inflation reduction progress. Bostic underlined the necessity of leaning toward maintaining high interest rates in order to guarantee the accomplishment of price stability objectives.

Thomas Barkin, the president of the Richmond Fed, emphasized on Friday that until there is more assurance that inflation will return to the 2% target.

Thomas Barkin, the president of the Richmond Fed, emphasized on Friday that until there is more assurance that inflation will return to the 2% target, the benchmark policy rate should continue to be restrictive. As US central bankers seek to decrease the rate of monetary easing this year, Fed Governor Adriana Kugler and San Francisco Fed President Mary Daly emphasized the difficult balancing act they must do.

The trimmed mean, a closely watched indicator of core inflation, dropped from 3.5% to 3.2% annually, bringing the Australian dollar closer to the Reserve Bank of Australia’s (RBA) target band between 2% and 3%. With a full quarter-point decrease anticipated by April, traders are presently putting in a 55% chance that the RBA would reduce its cash rate by 25 basis points to 4.35% in February.

In November, Australia’s monthly Consumer Price Index (CPI) increased 2.3% year-over-year, exceeding the 2.2% market prediction and continuing the 2.1% increase from the previous two months. Since August, this reading has been the highest. However, thanks to the continued influence of the Energy Bill Relief Fund refund, the number stays within the RBA’s target range of 2–3% for the fourth consecutive month.