Australian dollar fell as the Fed ruled out a rate cut in March.
On Thursday, the Australian dollar (AUD) extended its recent losses. The AUDUSD pair fell in the previous session following Federal Reserve (Fed) Chairman Jerome Powell’s remarks. Powell ruled out a rate drop at the forthcoming March meeting, which was widely expected after the Fed decided to maintain current interest rates. He stressed the continuing of high inflation while highlighting the steady expansion of economic activity.
The lackluster Australian quarterly inflation report fuels anticipation of two quarter-point cuts in 2024.
The Australian dollar may suffer downward pressure, as bond traders raise their expectations of early interest rate cuts by the Reserve Bank of Australia (RBA) following an unexpectedly dismal quarterly inflation report. Despite this, the RBA is expected to keep the cash rate at 4.35% during its February meeting. Futures markets have fully priced in two quarter-point decreases in 2024, with the first adjustment likely in August.
Australia’s Business Confidence (QoQ) fell to -6 in the fourth quarter, from -1 the previous quarter.
National Australia Bank’s business confidence (QoQ) fell to -6 in the fourth quarter, down from -1 the previous quarter. Building permits (MoM) fell 9.5% in December, compared to a projected 1.1% increase. Furthermore, the Chinese Caixin Manufacturing PMI in January remained constant. at 50.8, versus the projected 50.6 reading.
The US dollar was under pressure due to the poor US ADP Employment Change.
The US Dollar Index (DXY) fell following weak US employment numbers, but recovered after Fed Chair Powell made hawkish comments on Wednesday. The rise in US Treasury yields lends extra support to the US dollar (USD). Furthermore, increased risk aversion as a result of rising Middle Eastern tensions may help to strengthen the dollar. This, in turn, presents a challenge to the AUDUSD pair.
The US ADP Employment Change recorded 107K, falling short of the predicted 145K in January. The previous number was 158K in December. Thursday’s focus will be on US initial jobless claims, nonfarm productivity, and ISM Manufacturing PMI.
Daily Market Movers: Australian Dollar drops after Fed’s harsh remarks. Australia’s Monthly Consumer Price Index (CPI) rose 3.4% year on year in December, down from 4.3% in November and lower than the expected 3.7%.
RBA Trimmed Mean CPI (YoY) for the fourth quarter was 4.2%, down from the previously reported 5.2% and lower than the projected 4.3%.
The Australian CPI (QoQ) data came in at 0.6%, lower than the expected 0.8% and a significant reduction from the previous reading of 1.2%.
The Chinese Non-Manufacturing Purchasing Managers’ Index (PMI) rose to 50.7, slightly higher than the predicted result of 50.6.
China’s Manufacturing PMI reached 49.2, surpassing expectations and rising from the previous reading of 49.
The US balance sheet revealed that beginning October 2023, the drop in yields has helped to the sustainability of the US. Treasury, and faster economic growth has resulted in higher tax receipts. The US Treasury Department has disclosed plans to borrow $760 billion in the first quarter, down from an earlier estimate of $816 billion in October.
The US Employment Cost Index fell to 0.9%, compared to 1.0% projected in the fourth quarter.
In January, the Chicago Purchasing Managers’ Index recorded 46, falling short of the predicted increase to 48 from 47.2 the previous month.
US JOLTS job openings increased to 9.026 million in December, up from 8.925 million the previous month, above the expected 8.75 million.
The US Housing Price Index (MoM) remained constant at 0.3% in November.
