Australian Dollar Strengthens, Will Fed Weaken USD?
The AUD/USD currency pair is currently in a bullish consolidation phase, a brief pause in its uptrend, and is hovering around the 0.6600 level during the Asian session on Friday (December 5th). This level is just below the nearly two-month high touched the previous day. Fundamentally, the path of best practice for AUD/USD remains upward, but many market participants are choosing to hold off while awaiting the release of key US inflation data before extending long positions formed over the past two weeks.
Today's main market focus is the release of the US Core PCE Price Index for October, the Federal Reserve's favorite inflation indicator. This figure will significantly influence market expectations regarding how aggressively the Fed will cut interest rates going forward. If inflation continues to weaken, the likelihood of a December rate cut will strengthen, which could weaken the US dollar, pushing AUD/USD higher. Currently, market participants are pricing in a nearly 90% chance that the Fed will cut interest rates by 25 basis points next week, which is one of the main reasons for the USD's recent sluggish performance.
Meanwhile, signals from Australia are likely to be more hawkish. RBA Governor Michele Bullock acknowledged that inflation has not yet fully returned to its 2-3% target and emphasized that the central bank is still closely monitoring the latest inflation data. If price pressures prove persistent, the RBA will leave open the possibility of another interest rate hike next year. Expectations that the RBA could tighten further while the Fed is leaning toward easing are helping to support the strength of the AUD and are a key driver of the AUD/USD uptrend in the near term. (az)
Source: Newsmaker.id
