Anna 
The Australian dollar (AUD) continued its upward trajectory for the sixth consecutive session on Tuesday, while the US dollar remained under pressure. The AUD/USD pair experienced gains as traders speculated on a potential rate cut from the Federal Reserve, contributing to the weakening of the US dollar (USD). The Australian currency also found support in the country’s robust employment results and increasing incomes, signaling a strong economic recovery.
The Reserve Bank of Australia (RBA) released minutes from its meeting, highlighting “encouraging signs” in inflation. The RBA emphasized the need for this positive trend to persist, indicating that decisions on further tightening would be contingent on ongoing data and a comprehensive assessment of risks. The board acknowledged a balanced outlook, noting the potential for inflation to remain elevated for an extended period while weighing the risk of a more pronounced demand slowdown. Additionally, the RBA board cited staff forecasts predicting a return of expected inflation to the upper end of the range by the end of 2025.
The US Dollar Index (DXY) maintained stability as it awaited fresh developments in the US economy. DXY could find support from higher U.S. Treasury yields. Investors will closely monitor U.S. building permits and housing starts on Tuesday, with the People’s Bank of China (PBoC) set to announce an interest rate decision on Wednesday.
Federal Reserve Bank of New York President John Williams offered a counterpoint to speculation about a potential Federal Open Market Committee (FOMC) rate cut in March. San Francisco Fed President Mary Daly echoed the sentiment, stating that the Fed would maintain a relatively restrictive stance even if interest rates were cut three times in the coming year. Daly emphasized that it is premature to predict which meetings might alter policy stances in the upcoming year, with ongoing efforts focusing on objectives beyond achieving a 2% inflation target.
