Ella 
AUD/USD opened flat on Thursday in Asia as the Federal Reserve decided to keep interest rates on hold and leave the door open to easing policy in 2024. Despite the muted initial reaction to the statement, Federal Reserve Chairman Powell’s press conference supported the US dollar (USD). At press time, AUD/USD was trading at 0.6566, almost unchanged.
Aussie dollar falls after Fed decision, but opens Asian session near one-week low
In its monetary policy statement, the Fed acknowledged that inflation had eased over the past year but remained elevated. As a result, they said interest rates may have peaked, while adding that they may ease policy if inflation moves “sustainably toward 2%.” Risk aversion drives financial markets.
Fed Chairman Jerome Powell took a more balanced approach at a news conference, adding that it was too early to declare victory for inflation. He added that Fed officials are not confident of cutting interest rates at the upcoming March meeting, adding that a March rate cut is not officials’ base case.
The dollar has since given up some of its earlier losses, but U.S. Treasury yields have fallen sharply. AUD/USD fell below the 200-day moving average (DMA) of 0.6574, settling below it.
On the data front, U.S. labor market data showed that private sector hiring slowed to 107,000 jobs from 158,000 jobs in December, an ADP report showed, lower than expected. Fed officials expected the Employment Cost Index (ECI), which measures wage inflation, to rise 0.9% month-on-month, below expectations of 1.1%. Data suggests the job market is slowing.
In Australia, inflation slowed sharply in the fourth quarter of 2023, falling from 5.4% to 4.1% quarter-on-quarter and from 5.1% to 4.2% year-on-year. ANZ analysts believe this could prevent the Reserve Bank of Australia (RBA) from raising interest rates, suggesting the cash rate may have peaked.
Most recently, Australia’s final January Judo Bank Manufacturing PMI rose to 50.1 from a preliminary reading of 47.6.
