The Australian Dollar continues to lose ground. In the European session, AUD/USD is trading at 0.6657, down 0.43%.
In Australia, consumers remain pessimistic about the economy. The Westpac Consumer Sentiment index for January will be released on Tuesday. The index rebounded in December with a 2.7% gain, but the 82.1 reading was the nineteenth consecutive month below the neutral 100 level, pointing to prolonged pessimism. Consumer mood improved in December due to the Reserve Bank of Australia’s decision to maintain rates at last month’s meeting, but consumers continue to be squeezed by high rates and the cost of living crisis.
Aussie can’t find its footing
The Australian dollar touched a 10-month high on Christmas Day at 0.6871. Since then, however, it’s been all downhill for the Australian currency, which is down 2.2% in January. The US dollar has posted strong gains against most of the major currencies, getting a boost from stronger-than-expected US employment and inflation reports. This has weighed on risk appetite as the markets have trimmed expectations of a March rate cut.
The Fed is on board for rate cuts this year but has left investors frustrated as it hasn’t provided any details as to the timing of a first cut. With a recession considered unlikely, the Fed is not in any rush to cut rates and Fed members have pushed back against expectations of a March cut.
The strong nonfarm payrolls and CPI reports have reinforced the belief that the Fed might not trim rates before mid-2024. Atlanta Fed President Bostic said last week that he expected two rate cuts in 2024, a far cry from the six cuts that the market has priced in. On Sunday, the Financial Times reported that Bostic expressed concern that if the Fed eases up on rates too quickly, inflation could rise again which would be a “bad outcome”.
AUD/USD Technical
- AUD/USD has support at 0.6644 and 0.6601
- There is resistance at 0.6698 and 0.6732
