Australia's currency, the AUD/USD, has dropped to its lowest point in over a week. This decline stems from softer-than-expected consumer inflation data, which has reinforced predictions of a rate cut by the Reserve Bank of Australia (RBA) in February. The currency pair has been drawing sellers for three consecutive days, driven by these inflation figures.
Divergent policy expectations between the Federal Reserve and the Bank of Japan could provide some support to the AUD/USD. However, fears of a trade war may prevent any significant decline in the currency pair. In parallel, gold prices have struggled to build on previous gains, as investors await the conclusion of a two-day Federal Open Market Committee (FOMC) meeting. The outcome is expected to set the course for future market movements.
This FOMC meeting holds considerable weight as it will influence traders' directional decisions. The anticipation of possible rate cuts by the Fed continues to bolster non-yielding bullion, further aided by falling US bond yields. Meanwhile, the USD/JPY remains stable around the mid-155.00s as traders await key insights from the FOMC decision before making new bets.
As Australia prepares to release fresh inflation-related data on Wednesday, financial markets are bracing for indications that price pressures eased further towards the end of 2024. Such a trend would likely pave the way for an RBA interest rate cut in February, aligning with current market expectations.