The AUD/USD currency pair remained under some selling pressure for the second consecutive day on Wednesday and fell to the 0.6340 area during the first half of the European session, which may be the lowest level since November 2023. Furthermore, the fundamental backdrop suggests that the path of least resistance for AUD/USD remains to the downside, although bears may wait for the release of US consumer inflation data before placing new bets.
The crucial U.S. Consumer Price Index (CPI) report will have an impact on the outlook for U.S. interest rates and provide guidance for Federal Reserve policymakers next week. This, in turn, will have a key impact on the near-term US Dollar (USD) price dynamics and provide new directional momentum for the AUD/USD pair. At the same time, growing confidence that the U.S. central bank will take a cautious stance on interest rate cuts remains a supporting factor for further rises in U.S. Treasury yields. On top of this, ongoing geopolitical risks lifted the safe-haven US dollar to one-week highs, continuing to weigh on AUD/USD.
On the other hand, the Australian dollar (AUD) has been weighed down by the Reserve Bank of Australia’s (RBA) dovish bias, which is seen as another factor contributing to the weakness in AUD/USD. The Reserve Bank of Australia said in a monetary policy statement released on Tuesday that the board was confident that inflation would move towards its annual target of 2%-3%. In addition, the central bank abandoned its previous remarks that policy needed to remain restrained and reiterated expectations for an early interest rate cut. In addition to this, concerns over China’s fragile economic recovery and the US-China trade war also confirm the pair’s negative outlook.
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