The AUD/USD currency pair experienced a decline, reaching its lowest point in over a week, as softer-than-expected Australian consumer inflation data prompted market reactions. This inflation data has reinforced the anticipation of a Reserve Bank of Australia (RBA) interest rate cut in February, encouraging sellers to target the currency pair for the third consecutive day. Meanwhile, expectations of divergent monetary policies between the Federal Reserve and the Bank of Japan might continue to lend support to the currency pair.
As trade war concerns loom, they could potentially limit any significant decline in the AUD/USD pair. Concurrently, gold prices have struggled to capitalize on their previous upward movements. Investors eagerly await the outcome of the Federal Open Market Committee (FOMC) two-day meeting, set to play a crucial role in determining the next directional move of various assets, including gold and currency pairs.
The ongoing FOMC meeting is critical as it guides investors' decisions on placing fresh directional bets. Fed rate cut speculations and declining US bond yields are factors likely to continue supporting gold, a non-yielding asset. Meanwhile, the USD/JPY pair remained stable around the mid-155.00s on Wednesday as traders adopted a cautious approach ahead of the FOMC's crucial announcement.
Looking ahead, Australia is set to release new inflation-related data on Wednesday. Financial markets are anticipating further easing of price pressures by the end of 2024, setting the stage for a potential RBA interest rate cut in February. This forthcoming data release will be closely monitored by traders and economists alike, as it holds significant implications for monetary policy decisions and future currency movements.