Anna 
On Friday, the Australian dollar (AUD) made gains, nearing the psychological threshold of 0.6700, recovering from the previous session’s losses. The AUD/USD pair found support amidst increasing speculation that the U.S. Federal Reserve might implement interest rate cuts in March and May. However, the pair experienced a dip following better-than-expected inflation data from the United States.
Australia’s monthly consumer price index for October and November indicated a slight decline, suggesting that fourth-quarter 2023 headline inflation might fall below the Reserve Bank of Australia’s (RBA) annual forecast of 4.5%. Job vacancy data from the Australian Bureau of Statistics (ABS) showed a sixth consecutive quarter of declines, aligning with easing pressure in the labor market. These findings imply that the RBA might refrain from further interest rate hikes in February.
Despite weak inflation data, positive economic signals emerged from Australia, with November’s retail sales growth and December’s expanded trade surplus presenting a mixed economic outlook. These indicators may sway the RBA against implementing monetary policy easing measures.
China’s economic data revealed a 0.3% decline in the consumer price index (YoY) for December, contrary to the anticipated 0.4% decrease. The monthly consumer price index also showed a slight slowdown at 0.1%, compared to the market’s expectations of 0.2%. The annual producer price index fell 2.7%, slightly exceeding expectations for a 2.6% decline. With China’s trade balance in U.S. dollars rising to $75.34 billion, beating estimates, and positive growth in exports and imports, the People’s Bank of China (PBoC) may refrain from tightening policy, contributing to improved economic activity. The close business ties between China and Australia further supported the Australian dollar (AUD).
The U.S. dollar index (DXY) maintained recent gains following positive U.S. inflation data on Thursday. Despite a slight dip in the previous session as U.S. Treasury yields fell, the U.S. dollar (USD) was positioned to strengthen on Friday as yields showed signs of improvement.
The U.S. Bureau of Labor Statistics reported a surge in the Consumer Price Index (CPI) to 3.4% YoY in December, surpassing November’s 3.1% and market expectations of 3.2%. Core CPI slightly decreased to 3.9% YoY from November’s 4.0%, while the monthly figure remained steady at 0.3%, aligning with expectations.
Traders are anticipating the release of U.S. Producer Price Index (PPI) data for December to gain further insights into the U.S. economic outlook. Additionally, market attention will be directed towards Fed member Neel Kashkari’s speech later in the North American market, as it may provide contextual information and influence market sentiment.
