Anna 
The Australian dollar (AUD) experienced a setback, paring intraday gains against the U.S. dollar (USD) on Friday. While AUD/USD initially gained momentum due to the strengthening domestic shares in Australia and the surge in Wall Street tech stocks, uncertainties surrounding the trajectory of interest rates set by the Federal Reserve impacted the Australian currency.
Speculation about a potential interest rate cut by the Reserve Bank of Australia (RBA) gained traction after unexpected drops in employment change data for December. A survey of economists further supported the view that the RBA might commence rate cuts as early as September.
Geopolitical tensions in the Middle East contributed to risk aversion, prompting traders to seek safe-haven assets, including the U.S. dollar. The U.S.-led military coalition’s strikes against Houthi targets in Yemen, in response to missile attacks by the Iran-backed Houthi group, heightened global uncertainties.
The U.S. Dollar Index (DXY) maintained its positive bias, supported by favorable data on key U.S. indicators, reinforcing expectations of a longer period of monetary policy tightening by the Federal Reserve. Positive momentum was also driven by an increase in U.S. Treasury yields.
Traders are expected to closely watch preliminary data on the Michigan Consumer Confidence Index for January, which could further influence market dynamics.
