The Australian Dollar has seen a continuous decline against the US Dollar for three days following the release of disappointing Consumer Price Index (CPI) figures. In December 2024, the CPI rose by 2.5% year-on-year, consistent with forecasts, but the quarter-on-quarter growth of 0.2% for the fourth quarter matched prior performance yet fell short of the 0.3% anticipated by analysts. Annual CPI inflation dropped to 2.4%, down from 2.8% in the preceding quarter, also missing expected figures.
The Reserve Bank of Australia (RBA) noted a consistent CPI within its target range of 2-3%, maintaining a prudent outlook on interest rates. The Trimmed Mean CPI increased by 3.2% year-on-year, the slowest increase in three years, falling below the 3.3% expected but still remains above the RBA’s target. Given these easing inflation concerns, speculation about a potential interest rate cut in February has gained traction.
Compounding the AUD’s challenges is rising risk aversion linked to new tariff threats from the United States. The US government has announced intentions to impose tariffs on various imports, a move aimed at bolstering domestic manufacturing. This development has contributed to pressures on the Australian currency, which is sensitive to global economic dynamics.
Currently, the US Dollar remains stable, with market observers anticipating the Federal Reserve’s interest rate decision, projected to sustain rates within the 4.25%-4.50% range. The Fed’s cautious approach suggests that future policy directions will be delicately balanced, particularly in light of proposed US tariffs that may spur inflationary trends.
In Asia, China’s economic indicators signal ongoing struggles, with the Manufacturing PMI declining and industrial profits continuing to contract. These factors could further impact Australia’s economy, given the close trade relationship between the two nations.
As the AUD/USD pair hovers around 0.6230, technical analysis points towards a shift to a bearish bias, especially after breaking key support levels. In contrast, resistance is positioned at 0.6256; a recovery beyond this level could signal a potential reversal in sentiment towards a more bullish outlook.
