The AUD/USD pair remains under pressure, trading around 0.6215 during the early Asian session on Friday. The US Dollar (USD) is buoyed by expectations that the incoming Donald Trump administration will boost economic growth and inflation, further supporting the Greenback. Market activity is expected to remain subdued ahead of the New Year holiday.
US Federal Reserve’s Rate Decision and Inflation Outlook
The US Federal Reserve (Fed) recently reduced interest rates by 25 basis points, as anticipated. Fed Chair Jerome Powell emphasized that further rate cuts depend on continued progress in lowering persistent inflation. Analysts also predict that potential new tariffs under the Trump administration could drive up inflationary pressures, slowing the pace of future rate reductions and supporting the USD against the Australian Dollar (AUD).
US Jobless Claims Data Supports USD
Data from the US Department of Labor (DOL) on Thursday revealed that Initial Jobless Claims fell to 219,000 for the week ending December 21, slightly down from 220,000 the previous week and below market expectations of 224,000. This data provides additional support for the USD, reinforcing the outlook for fewer rate cuts by the Fed.
RBA’s Cautious Stance on Rate Cuts
On the Australian front, the latest Reserve Bank of Australia (RBA) monetary policy minutes revealed the central bank’s confidence that inflation is moving sustainably toward the target. However, the RBA cautioned against declaring victory too soon, noting a recent uptick in household spending and a tight labor market. Analysts now expect the RBA to begin cutting rates in the second quarter of 2025, with any easing cycle likely to be gradual.
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