AUD – Australian dollar
AUDUSD has been stuck within a tight range beneath US$0.6300, as investors take a wait-and-see approach, uncertain about U.S. President Donald Trump’s tariff strategy. With little clarity on the details of a broader tariff plan, the market has been hesitant, resulting in a lack of decisive action. As the Federal Reserve meeting approaches on Wednesday, there is strong anticipation that the central bank will hold interest rates steady, contributing to limited movement in the US dollar. Meanwhile, the market will be keeping a keen eye on Australia’s Q4 Consumer Price Index (CPI) data being released later this week, which has the potential to influence expectations of a future Reserve Bank of Australia’s (RBA) policy decision. US president Donald Trump’s proposed tariffs seem to be holding the market at bay as investors remain cautious of their intentions and driving growing risk-off sentiment.
As we look ahead, attention will turn to the Federal Reserve’s upcoming meeting, where the central bank is expected to keep interest rates in the 4.25%-4.50% range. In addition, Australia’s Q4 CPI data, scheduled for release on Wednesday January 29, is likely to impact market sentiment regarding the Reserve Bank of Australia’s (RBA) policy direction. At present, the market is anticipating a 25 basis-point rate cut in February, which would lower the RBA’s key interest rate to 4.10%.
Note: There will be no commentary on Monday January 27 due to the public holiday.
Key Movers
The US dollar (USD) remains largely unchanged as Thursday’s US trading session approaches. President Trump is scheduled to speak at the World Economic Forum in Davos, which is drawing attention. The US Dollar Index (DXY) has risen back above the 108.00 mark, but is experiencing some light selling pressure once again. The pound sterling (GBP) saw consolidation to the 1.2300 range off the back of the lack of clarity behind President Trumps tariff plans. Pound sterling investors’ focus now shifts to the Bank of England’s first-rate decision of the year on February 7, with a 25-basis point rate reduction almost fully priced in. The euro saw similar treatment with US tariff uncertainties driving cautiousness both in market and the ECB, as President Lagarde confirmed Europe should be ready to respond to Trump’s tariff hikes. The Japanese yen (JPY) managed to contain its recent slide, trading around 156.50 amidst The Bank of Japan commencing its two-day policy meeting. The market is expecting the central bank to increase its policy rate to 0.5% on Friday, which would present the highest short-term borrowing costs in 16 years.
Expected Ranges
AUD/USD: 0.6250 – 0.6300 ▲
AUD/EUR: 0.6010 – 0.6340 ▲
GBP/AUD: 1.900 – 1.9670 ▲
AUD/NZD: 1.1060 – 1.1080 ▼
AUD/CAD: 0.9000 – 0.9040 ▲