Aussie Dollar Outlook

It is still possible that the Reserve Bank of Australia will raise interest rates again in February, as mentioned in their previous minutes. Money market prices are currently divided between a 0% increase and a 25bps increment, which could lead to more clarity on Wednesday’s inflation print. On a positive note for the Australian dollar,

commodity prices are projected to remain high throughout the year largely due to China reopening and coal exports being directed toward European countries who have become increasingly concerned about Russian energy sources.

US Rates Outlook

Financial market participants are betting that the U.S. Federal Reserve will reduce its interest rate increase cycle for a second consecutive meeting in February, according to new data. The dollar began Friday testing a fresh nine-month low against other major currencies, signaling growing hesitance among investors about further monetary stimulus from the Fed’s policies.

Officials from the Federal Reserve are currently in a “quiet period” leading up to their policy meeting on February 1st. However, according to recent reports, expectations have shifted toward an upcoming move of 25 basis points rather than 50 basis points as seen at the last meeting.

The recent string of weak economic indicators has led to speculation that the United States economy slowed drastically at the end of 2022. Despite strong unemployment rates and steadily increasing demand in the labor market, this trend is being evidenced by declining retail sales and industrial production figures.