In the Friday North American session, the AUD/USD pair is trading within an extremely narrow range close to the yearly support level of 0.6200. With the Christmas and Boxing Day holidays having thinned trading volumes, the global markets are quiet, leaving the Aussie pair directionless.
The Reserve Bank of Australia (RBA) has signaled a shift in sentiment. Minutes from December’s policy meeting reveal that policymakers are now confident that inflation is easing as anticipated. This newfound confidence has led to growing expectations that it’s “appropriate” for the RBA to start unwinding the current level of monetary policy tightness. Traders are now betting on rate cuts starting from the February policy meeting.
On the other side of the pair, the US dollar has dipped slightly. The US Dollar Index (DXY) is having trouble maintaining the crucial 108.00 support level. Despite this minor decline, the dollar’s long – term outlook remains robust. The Federal Reserve (Fed) has pivoted from a more dovish stance to a more cautious one regarding interest rate cuts. Over the past three months, the progress towards the 2% inflation target has hit a snag, and the labor market has proven to be in better shape than it seemed in September. Moreover, potential immigration, tariff, and tax policies from President – elect Donald Trump are seen as having an inflationary impact on the US economy, further justifying the Fed’s caution.
As a result, the AUD/USD pair remains trapped near 0.6200, with the market waiting to see how these central bank postures will play out in the new year.
Related topics:
Oil Prices Edge Higher Amid Cooling U.S. Inflation and Eased Supply Concerns
Japan Faces Record Bond Supply as Central Bank Tightens Grip on Balance Sheet
Dollar Holds Steady as U.S. Inflation Moderates, Yen Nears Intervention Threshold
