AUD/USD Slides as AU Inflation Decelerates Further

  • AUDUSD
    (${instrument.percentChange}%)

AUD/USD Analysis

The Reserve Bank of Australia had refrained from raising rates at its last meeting in December and had softened its language around future moves, as it is making progress on inflation. Price pressures in Australia continued to abate according to today's data, as headline CPI eased to 4.1% in Q4, marking the slowest increase in a year. Monthly data and the quarterly trimmed mean measures, which exclude large rises and falls, also showed substantial deceleration. Earlier in the month, the employment report had shown the loss of 65,000 jobs in December, in what was the worst print in more than two years. The economy has slowed down, with GDP expanding by just 0.2% q/q in the third quarter.

The central bank has kept further tightening on the table, as inflation remains far from the 2-3% target, but today's CPI report raises the bar for such action. Markets believe that the terminal rate has already been reached and expect cuts later in the year. AUD/USD slides as a result and is in risk of new 2023 lows (0.6524), although further losses that would test 0.6364 would need strong catalyst.

On the other hand, the US Fed is more dovish, having already hinted at peak rates and signaled at least three cuts this year. As such, AUD/USD may find support and the chance to return above the EMA200 (0.6630). This would shift bias on the upside, but 0.6900 is distant.

Trade the News: View our Economic Calendar

The next leg of the move will be determined by Wednesday's Fed policy decision. Various officials have recently adopted a more cautious stance, pushing against the aggressive market pricing for cuts as early as March. If they intend to start lowering rates at that date, they would likely need to communicate that. If they don't, markets could be disappointed although their expectations have already been tempered. The Reserve Bank of Australia picks up the baton next week.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}
Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.