Anna 
The Australian Dollar (AUD) faces continued pressure against the US Dollar (USD) following weaker-than-expected economic data. The AUD/USD pair experienced a decline after Federal Reserve (Fed) Chairman Jerome Powell’s announcement, ruling out the possibility of a rate cut in the upcoming March meeting. Powell emphasized the persistence of elevated inflation and highlighted the robust expansion of economic activity.
The Australian Dollar encounters additional downward pressure as bond traders increase expectations of early interest rate cuts by the Reserve Bank of Australia (RBA) following an unexpectedly weak quarterly inflation report. Despite this, the RBA is anticipated to maintain the cash rate at 4.35% during its February meeting. Markets are pricing in two quarter-point reductions in 2024, with the first expected in August.
Weaker economic indicators, including a decline in National Australia Bank’s Business Confidence and Building Permits, contribute to the negative sentiment surrounding the Australian Dollar. Additionally, the Chinese Caixin Manufacturing PMI for January remains consistent but fails to provide substantial support.
The US Dollar Index (DXY) initially faced losses but rebounded after Powell’s hawkish comments, with rising US Treasury yields supporting the Greenback. Heightened tensions in the Middle East contributing to increased risk aversion may further strengthen the US Dollar, posing challenges for the AUD/USD pair.
Market participants will closely monitor US economic indicators, including Initial Jobless Claims, Nonfarm Productivity, and ISM Manufacturing PMI, for potential impact on currency movements.
