Australian dollar gained momentum following the RBA’s policy announcement on Tuesday.
Australian Dollar (AUD) has recovered its daily losses following the Reserve Bank of Australia’s (RBA) policy decision on Tuesday. On Tuesday, the central bank chose to drop its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10%, as expected, marking the first rate cut in four years.
The RBA has lowered its Official Cash Rate by 25 basis points, to 4.10%.
Signs of lowering inflation in Australia could lead to a rate decrease in February. December data revealed slowing price pressures, with the most recent quarterly Consumer Price Index (CPI) Rising less than expected in the fourth quarter of 2024. The Trimmed Mean CPI, the RBA’s preferred inflation metric, rose 0.5% in the quarter, lower than predicted, while the annualized rate fell to 3.2% from 3.5%.
The AUDUSD pair gained traction following US President Donald Trump’s decision to postpone the application of reciprocal tariffs. Furthermore, the US Dollar (USD) fell as a dismal US retail sales report stoked speculation that the Federal Reserve (Fed) may lower interest rates later this year, despite ongoing inflation concerns.
Daily Market Update: The Australian dollar falls when the US dollar strengthens and Treasury yields rise.
The US Dollar Index (DXY), which analyzes the US dollar’s performance against six major currencies, moves higher after recording losses in the previous three consecutive sessions due to improved US Treasury yields. The DXY trades around 106.80, while the yields on 2-year and 10-year US Treasury bonds are 4.26% and 4.50%, respectively.
Federal Reserve Governor Michelle Bowman said on Monday that rising asset prices may have delayed the Fed’s recent efforts on inflation. While Bowman anticipates inflation to fall, she stressed that upside risks still exist and emphasized the need for more certainty before considering rate reduction.
Meanwhile, Fed Governor Christopher Waller admitted late Monday that, while inflation has improved, it has been “excruciatingly” sluggish. Waller emphasized that the Fed should not allow policy uncertainty to impede data-driven decision-making.
The US Census Bureau reported on Friday that retail sales declined 0.9% in January, following a revised 0.7% increase in December (originally reported as 0.4%). This The market expected a 0.1% dip, but the decline was steeper.
Fed Chair Jerome Powell stated in his semi-annual report to Congress that the board’s officials “do not need to be in a hurry” to lower interest rates due to job market strength and strong economic growth.
Fed Chair Jerome Powell stated in his semi-annual report to Congress that the board’s officials “do not need to be in a hurry” to lower interest rates due to job market strength and strong economic growth. He said that US President Donald Trump’s trade measures could put additional upward pressure on prices, making it more difficult for the central bank to cut interest rates.
On Monday, Chinese President Xi Jinping met with Alibaba co-founder Jack Ma and other famous entrepreneurs, signifying Beijing’s reinvigorated support for the private sector, which is now viewed as critical to economic recovery, according to Bloomberg. Xi stressed the need to remove obstacles that prevent equal access to Production resources and equitable market competition.
