Forex

The pair slides as the Fed laid the groundwork for a policy pivot, but warned it’s not yet ready to cut rates

Australian inflation moderated further in Q5 according to today’s data, raising the bar for further monetary tightening by the RBA, putting pressure on the pair

Core PCE has come in at 2.9% y/y, with a strong showing in disinflation towards the Federal Reserve’s target of 2%. The monthly number is 0.17%, which annualises to 2.01%. There is a general confidence that the Federal Reserve is well on its way to hitting its inflation target, with the market currently giving a 50-50 chance of a 25bps cut in March and a 90% chance in May.

The Bank of Japan maintained its loose setting but also pointed to confidence that it will restore price stability, so the pair fails to benefit, while markets await US PCE inflation update and other key data

The USDOLLAR is repricing as the chances of a March rate cut dissipate. Currently the CME FedWatch Tool has the probability for a March cut at 42.4%, which is a big decline from the 76.98% from a weak ago.

The pair extends this month’s gains as further moderation in Japanese inflation raises the bar for BoJ normalization and recent Fed speakers temper aggressive market bets for Fed rate cuts

The Australian economy lost more than 65,000 jobs in December according to today’s data, keeping the pair in precarious position, as it runs its third straight losing week

The pair drops as further moderation in the pace of wage increases takes some of the pressure off the central bank, but Wednesday’s inflation data loom

Australian inflation eased substantially to 4.3% in November, which along with subdued economic activity allows the RBA to stay on the sidelines, but the pair finds support as market await US CPI update

The pair lacks firm direction as markets digest the recent US jobs data and Fed speak, ahead of Thursday’s CPI inflation report

The pair rises this week in the aftermath of the BoJ’s inaction and yesterday’s Fed minutes, which noted uncertainty around the policy path, as markets await the US jobs report