Anna 
The Australian Dollar (AUD) continues to strengthen, marking its third consecutive session of gains on Friday, propelled by expectations of a potential decline in the US Dollar (USD). Federal Reserve (Fed) Chair Jerome Powell, during his second day of congressional testimony, reiterated the central bank’s stance and hinted at the possibility of borrowing cost reductions later this year. Powell emphasized, however, that any such actions would be contingent on the inflation trajectory aligning with the Fed’s targeted 2%.
The positive momentum of the Australian Dollar is further buoyed by an improved market sentiment, driven by a notable surge in equity markets. The S&P/ASX 200 Index has achieved new record highs, following a tech-led rally on Wall Street overnight. This upswing in market confidence is fueled by widespread expectations that major central banks may implement interest rate cuts in the course of the year.
The resilience of the Australian market is particularly noteworthy, considering recent concerns about the domestic economy’s fourth-quarter expansion falling below expectations. Additionally, the Trade Balance surplus came in below anticipated levels. These economic indicators have prompted discussions about the possibility of the Reserve Bank of Australia (RBA) contemplating rate cuts in the near future.
Market speculation suggests that the RBA could initiate rate cuts as early as August, with an anticipated total easing of 45 basis points throughout 2024. Despite these considerations, the Australian Dollar remains robust, benefitting from positive market sentiment and a broader outlook of potential central bank actions globally.
