AUDUSD has extended its rebound to approximately 0.6840.
In the Asian session, the AUDUSD pair has extended its rebound to approximately 0.6840. The Australian dollar has gained momentum as investors shrugged off turbulence caused by the release of hawkish Federal Open Market Committee (FOMC) minutes in the late New York session.
RBA’s decision to maintain policy tightening may be unaffected by a drop in the Australian labor cost index.
Conversely, the absence of major softening signals in Australian inflation strengthens the case for the Reserve Bank of Australia to maintain policy tightening (RBA). On Wednesday, Australia’s Wage Price Index (Q4) increased by 0.8%, falling short of the consensus of 1.0%. This may have brought relief to the RBA since decreased household funds would result in lower expenditure.
Further rate rises, however, are unavoidable because current inflation is four times higher than the anticipated aim.
The positive market sentiment has resulted in a significant fall in the US Dollar Index to roughly 104.00.
After a turbulent Wednesday, the S&P500 futures have recovered dramatically, indicating a fantastic rebound by the risk-aversion theme. The positive market sentiment has resulted in a significant correction in the US Dollar Index (DXY). Notwithstanding the Federal Reserve (Fed) officials’ rush to attain the interest rate peak in order to reduce inflationary pressures, the Dollar Index has solidly fallen to about 104.00.
Fed Chair Jerome Powell and his colleagues are concerned about the strengthening job market.
The market and a rebound in consumer spending might spark a rebound in the US Consumer Price Index (CPI). The FOMC minutes revealed that two officials, Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard, were opposed to slowing the pace of rate hikes.
Investors should be aware that the Fed reduced the pace of policy tightening in the December monetary policy meeting to 50 basis points (bps) after rising interest rates by 75 bps four times in a row.
