Anna 
On Friday, AUD/USD struggled to achieve a second consecutive day of gains, with bullish momentum potentially giving way. Notably, the Australian dollar has strengthened even in the face of a stronger U.S. dollar, despite falling U.S. Treasury yields. Market volatility is anticipated to subside as financial markets close for the Australia Day holiday.
The positive performance of copper and iron has contributed to the Australian dollar’s favorable reaction. Furthermore, news of additional stimulus measures from the People’s Bank of China (PBoC) may provide support to the Australian dollar. However, expectations persist that the Reserve Bank of Australia (RBA) will lower borrowing costs later in the year, and adjustments to the Phase 3 tax cut package could potentially delay the first rate cut.
The RBA Bulletin has indicated that businesses, over the past six months, widely anticipated a slowdown in price growth. The consensus expectation is that average prices will remain above the RBA’s inflation target range of 2.0-3.0%.
The U.S. Dollar Index (DXY) may seek to extend gains after better-than-expected U.S. GDP data further reinforced the robust U.S. economy. U.S. GDP grew by 3.3% year-on-year in Q4, surpassing the market consensus of 2.0%, with the previous value at 4.9%.
U.S. Treasury Secretary Janet Louise Yellen expressed that the strong performance of the U.S. economy in Q4 was viewed as positive and was unlikely to present a challenge to inflation. Yellen attributed the strong GDP numbers to robust and healthy spending, along with improvements in productivity. She emphasized that there was no indication in the GDP report suggesting a threat to the prospect of a “soft landing” for the U.S. economy.
Traders are closely monitoring Friday’s release of the personal consumption expenditures (PCE) price index data, offering insights into monthly changes in personal spending and personal income, following the GDP report.
