Anna 
The Australian dollar (AUD) continued to see gains for a second consecutive session, displaying bullish momentum and contributing to a notable upward movement in the AUD/USD pair. Notably, the AUD strengthened against a robust US dollar, despite a decline in US Treasury yields. Market volatility is anticipated to subside with the closure of financial markets for the Australia Day holiday.
The AUD received positive impetus from strong performances in copper and iron markets. Furthermore, news of additional stimulus measures from the People’s Bank of China (PBoC) supported the Australian dollar. However, expectations persist that the Reserve Bank of Australia (RBA) will implement interest rate cuts later in the year. Adjustments to the Phase 3 tax cut package might slightly delay the first rate cut, potentially pushing it back by several months.
RBA announcements indicate that businesses, over the past six months, widely predict a slowdown in price growth. The consensus outlook suggests that average prices will stay above the RBA’s inflation target range of 2.0-3.0%.
The US dollar index aims to capitalize on recent gains following stronger-than-expected US gross domestic product (GDP) data, reinforcing the resilience of the US economy. The Q4 annualized US GDP growth was 3.3%, surpassing market expectations of 2.0%.
US Treasury Secretary Janet Yellen expressed positivity about the strong Q4 GDP performance, stating that it was unlikely to pose an inflation challenge. Yellen attributed the robust GDP numbers to healthy spending and improved productivity, emphasizing that there was no indication in the report threatening the prospect of a “soft landing” for the US economy.
Traders are attentively awaiting Friday’s release of the personal consumption expenditures (PCE) price index data, following the GDP report. The data will provide insights into monthly changes in personal spending and personal income.
