The AUD/USD currency pair has seen a significant drop, reaching its lowest point in over a week. This decline is attributed to the release of softer-than-expected Australian consumer inflation data. The data has reinforced market expectations that the Reserve Bank of Australia (RBA) may implement a rate cut in February. This development has led to the AUD/USD attracting sellers for the third consecutive day.
The fluctuating dynamics of central bank policies, particularly the divergent expectations of the Federal Reserve (Fed) and the Bank of Japan (BoJ), have been acting as a tailwind for the AUD/USD currency pair. However, trade war fears continue to loom, potentially limiting any substantial declines in the currency pair.
In other market movements, gold prices struggled to build on their previous positive performance. Investors are closely monitoring the outcome of the Federal Open Market Committee's (FOMC) two-day meeting, which will play a crucial role in determining the next directional move for gold prices. The non-yielding bullion finds support from ongoing bets on Fed rate cuts and declining US bond yields.
Meanwhile, the USD/JPY currency pair has shown signs of consolidation around the mid-155.00s as of Wednesday. Traders have adopted a cautious stance, opting to await the key FOMC decision before placing new directional bets in the market.
The upcoming release of fresh Australian inflation-related data on Wednesday is highly anticipated by financial markets. Analysts expect this data to indicate that price pressures eased further towards the end of 2024. Such an outcome would likely bolster the case for an RBA interest rate cut in February.