Anna 
During the European session on Monday, the AUD/USD pair rebounded near 0.6570, snapping a two-day losing streak. The advance was attributed to a retreat in the US Dollar (USD) amid lower US Treasury yields. However, market participants exercised caution ahead of the Reserve Bank of Australia’s (RBA) policy decision scheduled for Tuesday.
The US Dollar Index (DXY) hovered around 103.40, while the 2-year and 10-year US Treasury yields stood at 4.71% and 4.29%, respectively, at press time. Friday witnessed increases in US yields driven by a hawkish sentiment surrounding the Federal Reserve, which is expected to maintain its elevated interest rates at Wednesday’s meeting in response to recent inflationary pressures.
The Australian Dollar (AUD) found support as the S&P/ASX 200 Index recovered from its losses. However, challenges persisted during Asian hours due to softer commodity prices.
Westpac anticipates the RBA to keep its cash rate at 4.35% at Tuesday’s meeting. RBA Governor Michele Bullock recently emphasized that inflation in Australia is primarily “homegrown” and “demand-driven,” attributed to the strength of the labor market and increasing wage inflation. The RBA does not foresee this phenomenon occurring until 2026.
Investors are also awaiting interest rate decisions from the People’s Bank of China (PBoC). Chinese Retail Sales (YoY) exceeded expectations, increasing by 5.5% in February compared to the previous reading of 7.4%. Similarly, Chinese Industrial Production (YoY) rose by 7.0%, surpassing market expectations of a 5.0% figure in February. These developments add to the anticipation surrounding the RBA decision and its potential impact on the AUD/USD pair.
