Ella 
AUD/USD extended gains for the second consecutive session on Monday. A weaker U.S. dollar supported the AUD/USD exchange rate. However, the Australian dollar’s gains narrowed after China announced its interest rate decision. The People’s Bank of China (PBOC) kept the one-year and five-year loan prime rates (LPR) unchanged at 3.45% and 3.95% respectively.
Australia’s 10-year bond yield is hovering around 4.2%, its lowest level in a month, and the Australian dollar may face challenges. The drop in bond yields follows a softer first-quarter domestic jobs report. Slowing wage growth has led to markets discounting the chances of the Reserve Bank of Australia (RBA) raising interest rates. Australia’s wage price index rose 0.8% in the first quarter (quarter-on-quarter), missing consensus forecasts of 0.9%. The quarterly increase was the smallest since late 2022.
The Fed remains cautious on inflation and the possibility of a rate cut in 2024. Federal Reserve Board of Governors member Michelle Bowman made headlines on Friday when she suggested that progress on inflation might not be as steady as many had hoped. Bowman said the decline in inflation observed in the second half of last year was temporary and there was no further progress in inflation this year.
