Ella 
AUD/USD plunged to a three-month low following hawkish comments from Federal Reserve Chairman Jerome Powell and as markets maintained expectations of a dovish interest rate policy from the Reserve Bank of Australia. As a result, AUD/USD is flat near 0.6483.
Australian dollar stabilizes as traders brace for RBA decision
AUD/USD extended losses on Monday as market participants digested Powell’s comments. Fed Chairman Jerome Powell added that the Fed is committed to achieving its 2% goal and that he and his colleagues are looking ahead to three rate cuts in 2024. Powell added that it would be too early to start easing policy in March, adding that the easing cycle could start in the first half of 2024.
In addition, AUD/USD traders took cues from data released during the US session, with the ISM Services Purchasing Managers Index coming in higher than expected, with the indicator rising to 53.4 from 50.5 last month, beating expectations of 52.
Meanwhile, upbeat ISM data and a surge in U.S. Treasury yields supported the dollar. The 10-year U.S. Treasury yield rose 13 basis points to 4.16%; the U.S. dollar index (DXY) closed at 104.45, up 0.47%.
Traders are watching the release of the Reserve Bank of Australia’s (RBA) monetary policy meeting. The Reserve Bank of Australia is expected to keep interest rates on hold at 4.35% after the latest inflation data came in weaker than expected. Market participants are eyeing a dovish monetary policy statement and expect the Reserve Bank of Australia to remove language that “further tightening is needed”.
In this regard, ANZ analysts commented, “Fourth quarter inflation reinforces our view that there will be no change in interest rates. We believe that the Reserve Bank of Australia will retain a tightening bias in the post-meeting statement, although the Reserve Bank of Australia may admit The economy has generally slowed since the last board meeting and inflation data has been softer.”
