Ella 
AUD/USD fell slightly in early Asian trading on Wednesday. However, downside for AUD/USD remains limited as dovish comments from the Fed are likely to keep the US dollar (USD) under pressure. Markets are set to calm down amid thin trading volume in the final week of the year. AUD/USD is currently trading around 0.6823, down 0.02% on the day.
On Tuesday, the U.S. Dallas Fed Manufacturing Business Index for December was -9.3, compared with the previous reading of -19.9. Meanwhile, the Chicago Fed’s national activity index was 0.03 in November, compared with -0.49 previously. The Philadelphia Fed’s non-manufacturing index rose to 6.3 in December from -11.0 previously.
The U.S. Bureau of Economic Analysis’ core personal consumption expenditures price index, released on Friday, rose 0.1% on the month and 3.2% on the year. The market reaction was muted after the data was released. The Federal Reserve (Fed) is not yet ready to declare victory on inflation, but a pullback in core inflation measures opens up room for the Fed to cut the funds rate in 2024. However, the timing of the rate cut will depend on the core PCE price index in the coming months.
In terms of the Australian dollar, the minutes of the Reserve Bank of Australia meeting showed that despite noting “encouraging signs” of declining inflationary pressures across the economy, the central bank may raise interest rates again. The minutes added that any further tightening would depend on whether Australian economic data changes the economic outlook and evolving risk assessments.
The Richmond Fed’s manufacturing index for December will be released today, and the number of Americans filing initial jobless claims last week will be released on Thursday. Financial markets will remain relatively calm ahead of the New Year holiday.
