The Australian dollar has steadied on Thursday and is trading at 0.6732 in the European session, up 0.02%. This follows a four-day slide in which the Aussie fell 1.6%. Later in the day, the US releases unemployment claims and the ADP employment report, which comes just one day ahead of US nonfarm payrolls.
China’s Caixin Services PMI improved to 52.9 in December, above 51.5 in November and beating the market consensus of 51.6. The solid reading has helped the Australian dollar stabilize today. China is Australia’s biggest export market and the Australian dollar is sensitive to key releases out of China.
Fed Uncertain About Rate Cuts Timing
The December rate meeting was a barn-burner as Fed Chair Powell surprised the markets by jumping on the rate-cut bandwagon. The Fed is, however, showing more caution than the markets, which have priced in six rate cuts in 2024 compared to three from the Fed.
The minutes of the December meeting were on the dull side, as Fed members did not provide any details as to the timing of rate cuts. The minutes stated that the Fed viewed the current benchmark rate at or close to the peak, but added that there was an “unusually elevated degree of uncertainty” about the rate path, which would depend on economic conditions.
On the inflation front, members said “clear progress” had been made, but noted that core services continued to move higher. The message from the Fed was of caution – inflation is moving in the right direction but the battle is not yet over. The US dollar had a muted reaction to the minutes, while the equity markets declined as investors were disappointed that the timing of rate cuts remains up in the air.
AUD/USD Technical
- AUD/USD is testing resistance at 0.6735. Above, there is resistance at 0.6767
- 0.6698 and 0.6666 are providing support