Anna 
The Australian dollar (AUD) extended its losing streak on Tuesday, marking a decline since January 11. AUD/USD is currently facing downward pressure following the release of Westpac consumer confidence data for January, indicating a contraction. This development is likely to reinforce the sentiment that the Reserve Bank of Australia (RBA) will not pursue further policy tightening at its upcoming board meeting in February.
The Australian Consumer Confidence Index, published by the Melbourne Institute of Economics and Business, reported a decline of 1.3%, in contrast to the 2.7% increase seen previously. However, recent inflation data from TD Securities for December revealed an uptick, potentially mitigating the losses for the Australian dollar.
The U.S. dollar index exhibited an opening gap on Tuesday, supported by positive U.S. Treasury yields. Investor confidence in the U.S. dollar appears to be resurging, influenced by hawkish comments from Atlanta Fed President Raphael Bostic over the weekend. Bostic cautioned against rapid interest rate cuts, warning that such actions might lead to inflation fluctuations and a slower decline towards the central bank’s 2.0% target in the coming months.
The dollar’s strength was further fueled by risk aversion as the geopolitical conflict between Israel and Gaza escalated, causing disruptions in trade along the Red Sea. Despite recent military strikes by the U.S. and UK against Houthi forces in Yemen, the Iran-backed Houthi armed group continued targeting ships at sea.
Traders are closely monitoring the New York state manufacturing index for January and anticipate insights from Fed Waller’s speech later on Tuesday. Additionally, attention is turning to China’s upcoming release of gross domestic product (GDP) and retail sales data scheduled for Wednesday, which could further impact global market dynamics.
