- The Australian Dollar rebounds from its daily losses following the release of Consumer Inflation Expectations on Thursday
- Australia’s Consumer Inflation Expectations rose to 4.2% in December, up from 3.8% in the previous month.
- Meanwhile, the US Dollar Index (DXY) reached 108.28 on Thursday, marking its highest level since November 2022
The Australian Dollar (AUD) recovers from daily losses after the release of Consumer Inflation Expectations on Thursday. However, the AUD/USD pair still falls as the US Dollar (USD) strengthens, following the Federal Reserve’s (Fed) hawkish decision to reduce rates by 25 basis points (bps) at its December meeting, lowering its benchmark lending rate to 4.25%-4.50%, the lowest level in two years.
Australia’s Consumer Inflation Expectations rose to 4.2% in December, up from 3.8% the previous month, marking the highest level since September. Despite this, the AUD faces pressure due to the increasing probability that the Reserve Bank of Australia (RBA) will cut interest rates more quickly and significantly than initially anticipated. Future RBA decisions will be data-driven, with evolving risk assessments influencing the bank’s approach.
The US Dollar strengthened as the Federal Reserve’s Summary of Economic Projections, or “dot-plot,” indicated only two rate cuts in 2025, down from the four previously forecasted in September. During a press conference, Fed Chair Jerome Powell emphasized that the central bank would remain cautious about further cuts, as inflation continues to stay above its 2% target.
Market participants are likely to focus on the upcoming US economic data, including weekly Initial Jobless Claims, Existing Home Sales, and the final Q3 Gross Domestic Product (GDP) reading, which is scheduled for release on Thursday.
Australian Dollar faces downward pressure after the Fed’s hawkish rate cut
- National Australia Bank (NAB) maintains its forecast for the first Reserve Bank of Australia rate cut at the May 2025 meeting, though they acknowledge February as a possibility. NAB’s report indicates that the Unemployment Rate is expected to peak at 4.3% before easing to 4.2% by 2026 as the economy stabilizes. The Q4 trimmed mean inflation is projected at 0.6% quarter-on-quarter, with a gradual easing expected, reaching 2.7% by late 2025.
- Australia’s Westpac Consumer Confidence fell 2% to 92.8 points in December, reversing two months of positive momentum.
- On Tuesday, the US Census Bureau reported that US Retail Sales rose 0.7% MoM in November, compared to the 0.5% prior increase. Meanwhile, the Retail Sales Control Group increased 0.4% from the previous decline of 0.1%.
- Reuters cited two sources on Tuesday that China is set to target economic growth of around 5% in 2025. This decision follows a meeting among top Chinese officials at the Central Economic Work Conference last week. The growth target remains the same as this year, which China is expected to achieve.
- China’s foreign exchange regulator, the State Administration of Foreign Exchange (SAFE), reported a net outflow of $45.7 billion from China’s capital markets in November. Cross-border portfolio investment receipts totaled $188.9 billion, while payments reached $234.6 billion, resulting in the largest monthly deficit on record for this category.
- The preliminary S&P Global US Composite Purchasing Managers Index (PMI) rose to 56.6 in December, from 54.9 prior. Meanwhile, the Services PMI improved to 58.5 from 56.1. The Manufacturing PMI declined to 48.3 in December, from the previous 49.7 reading.
- Chinese authorities, led by President Xi Jinping, have pledged to raise the fiscal deficit target next year, shifting policy focus to consumption to boost the economy amid looming 10% US tariffs threatening exports. The lack of concrete details on fiscal support has put downward pressure on the AUD, given China’s status as Australia’s largest trading partner.
The Australian Dollar maintains its position above 0.6200, staying above the lower boundary of the descending channel
The AUD/USD pair is trading near 0.6220 on Thursday. A daily chart analysis shows a bearish trend as the pair moves within a descending channel pattern. However, the 14-day Relative Strength Index (RSI) has dropped below the 30 mark, signaling an oversold condition and suggesting the possibility of an upward correction.
In terms of support, the AUD/USD pair may find the lower boundary of the descending channel near the 0.6140 level.
On the upside, initial resistance for the AUD/USD pair could be encountered at the nine-day Exponential Moving Average (EMA) at 0.6326, followed by the 14-day EMA at 0.6362, which aligns with the upper boundary of the descending channel around the 0.6400 level. A breakout above this channel could push the pair towards the eight-week high of 0.6687.
AUD/USD: Daily Chart Analysis
Australian Dollar PRICE
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.09% | 0.43% | 0.02% | 0.02% | 0.51% | -0.06% | |
| EUR | 0.16% | 0.07% | 0.53% | 0.18% | 0.19% | 0.67% | 0.11% | |
| GBP | 0.09% | -0.07% | 0.51% | 0.13% | 0.11% | 0.60% | 0.05% | |
| JPY | -0.43% | -0.53% | -0.51% | -0.38% | -0.39% | 0.06% | -0.45% | |
| CAD | -0.02% | -0.18% | -0.13% | 0.38% | 0.00% | 0.48% | -0.06% | |
| AUD | -0.02% | -0.19% | -0.11% | 0.39% | -0.00% | 0.50% | -0.06% | |
| NZD | -0.51% | -0.67% | -0.60% | -0.06% | -0.48% | -0.50% | -0.55% | |
| CHF | 0.06% | -0.11% | -0.05% | 0.45% | 0.06% | 0.06% | 0.55% |
