Anna 
The Australian Dollar (AUD) staged a recovery on Tuesday, retracing recent losses against the US Dollar (USD) following the Reserve Bank of Australia’s (RBA) decision to maintain its Official Cash Rate (OCR) at 4.35%, in line with expectations. The AUD initially faced headwinds from hawkish comments by Federal Reserve (Fed) Chair Jerome Powell and a dip in commodity prices.
On the economic front, the Australian Bureau of Statistics released Retail Sales (QoQ) data, revealing a positive trend with a 0.3% increase in the fourth quarter compared to the previous growth of 0.2%. While the Australian economy grapples with a cost-of-living crisis, the focus now shifts to the RBA’s future monetary policy decisions, particularly the potential timing of interest rate reductions. Investors eagerly await insights from RBA Governor Michele Bullock’s upcoming speech, anticipating clues about the central bank’s outlook and possible actions.
Governor Bullock, in a post-interest rate decision press conference, emphasized the RBA’s balanced approach to risks and its active pursuit of data confirming a return of inflation to the target level. The central bank is navigating a potentially narrow path to achieve its inflation target, with a 2.8% inflation forecast for the year 2025.
The US Dollar Index (DXY) experienced a surge following the Fed’s hawkish stance, driven by robust ISM Services data for January. The positive ISM Services PMI, exceeding expectations at 53.4, and Powell’s emphasis on monitoring inflation contributed to increased US Treasury yields, exerting downward pressure on the AUD/USD pair.
