Australian dollar fell for second time in a row due to poor Australian inflation data.
The Australian Dollar (AUD) remained in a downward trend on Wednesday. As Australian inflation slowed more than expected in the December quarter. As a result, traders are expecting the Reserve Bank of Australia (RBA) to slash interest rates up to twice this year. The current risk-off mood is putting more downward pressure on the AUDUSD pair. As market participants exercise caution amid rising tensions in the Middle East.
Australia’s Monthly CPI fell to 3.4% in December, from 4.3% in November.
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%. The RBA Trimmed Mean CPI (YoY) for the fourth quarter was 4.2%, down from the previously reported 5.2% and lower than the predicted 4.3%. Meanwhile, the CPI (quarter-on-quarter) result was 0.6%, lower than expected at 0.8% and a significant reduction from the prior reading of 1.2%.
Traders anticipate two rate decreases by the Reserve Bank of Australia in 2024.
The Reserve Bank of Australia’s inflation goal range is 2.0% to 3.0%. Although the current results do not fall into this desired range. They show a Significant improvement compared to the peak CPI rate of about 8.0%. The RBA’s policy meeting is planned for February 5 and 6. And it is highly predicted that interest rates will remain unchanged.
In January, China’s non-manufacturing and manufacturing PMIs improved to 50.7 and 49.2, respectively.
The China Federation of Logistics and Purchasing (CFLP) has issued. The monthly Non-Manufacturing Purchasing Managers’ Index (PMI). Which shows an improvement in the performance of China’s service sector in January. The reading came in at 50.7. Slightly higher than the projected 50.6. Concurrently. The Manufacturing PMI improved, hitting 49.2, achieving the expected figure. And surpassing the previous reading of 49. These improved data should help limit the losses of the Aussie Dollar. As Australia and China are close trade partners. .
The Fed is anticipated to keep interest rates at 5.5% for the fourth consecutive time.
The US Dollar Index (DXY) faces a challenge due to low US Treasury yields. The risk aversion mood may worsen. As the government of US President Joe Biden is expected to authorize military operations in reaction to the recent drone attack on a US facility in Jordan. Investors will be watching the US ADP Employment Change on Wednesday, ahead of the US Nonfarm Payrolls later this week.
The Federal Open Market Committee (FOMC) is widely expected to keep interest rates in the 5.25-5.50% range for the fourth consecutive meeting on Wednesday. During the Federal Reserve’s (Fed) December meeting, members forecast three rate cuts in 2024. Investors are eagerly anticipating signs from Fed Chairman Jerome Powell. Rate swap markets have experienced a Expectations for rate cuts have gradually increased, with the CME’s FedWatch Tool indicating a 43% chance of the Fed cutting interest rates for the first time in March. Swaps, on the other hand, initially implied that rates would be cut in March by more than 80% in December. Furthermore, there is a 53% possibility of a 25 basis point rate reduction in May.
Daily Market Movers: The Australian dollar falls following softer Australian Inflation Data
The Australian Dollar (AUD) remained in a downward trend on Wednesday. As Australian inflation slowed more than expected in the December quarter.
Australia’s retail sales (MoM) fell 2.7% in December. This statistic compared with the predicted 0.9% decline and indicated a significant reversal from the prior gain of 2.0%.
Australia’s Manufacturing PMI rose from 47.6 to 50.3, indicating an improvement. Services PMI increased from 47.1 to 47.9. The Composite PMI recorded. An rise of 48.1 over December’s 46.9.
The US balance sheet indicated that from October 2023, the drop in yields has helped to the US Treasury’s sustainability, while higher economic development has resulted in increased 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.
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.
The US Core Personal Consumption Expenditures Price Index (PCE) increased by 0.2% in December, as expected, compared to 0.1% in the prior report. The yearly Core The PCE increased 2.9%, falling short of the predicted 3.0% and the previous estimate of 3.2%.
The US Gross Domestic Product Annualized (Q4) reading was 3.3%, compared to 4.9% the previous quarter, beating the market consensus of 2.0%.
