Australian Dollar remains steady after recovering losses, US GDP Annualized eyed – FXStreet

• The Australian dollar recovered its daily losses after Thursday's announcement of consumer inflation expectations.
• Australian consumer inflation expectations rose to 4.2% in December, up from a previous rise of 3.8%.
• The US dollar index (DXY) hit 108.28 on Thursday, its highest since November 2022.

The Australian dollar (AUD) narrowed its daily decline following Thursday's announcement of consumer inflation expectations. However, the US dollar (USD) strengthened as the Federal Reserve (Fed) implemented a hawkish interest rate cut of 25 basis points (bps) at its December meeting on Wednesday, lowering its benchmark lending rate to the £1,000 range. , the AUD/USD pair fell. It was 4.25-4.50%, the lowest level in two years.

Australian consumer inflation expectations rose to 4.2% in December from 3.8% the previous month, the highest level since September. However, the Australian dollar is struggling as the Reserve Bank of Australia (RBA) looks more likely to cut interest rates more quickly and significantly than initially expected. However, future decisions will be driven by data and evolving risk assessments will guide the RBA's approach.

The economic forecast summary (the “dot plot”) showed only two rate cuts in 2025, down from four expected in September, which helped the dollar strengthen. Additionally, Fed Chairman Jerome Powell said in a press conference that the Fed is cautious about cutting rates further as inflation remains stubbornly above the central bank's 2% target.

Traders will be keeping an eye on weekly new U.S. jobless claims, existing home sales and the final annual third-quarter gross domestic product figures to be released on Thursday.

Australian dollar comes under downward pressure after Fed's hawkish interest rate cuts

• National Australia Bank (NAB) maintains its expectation that the Reserve Bank of Australia's first interest rate cut will occur at its May 2025 meeting, although it admits February is a possibility. The unemployment rate is expected to peak at 4.3% and fall to 4.2% by 2026 as the economy stabilizes, according to the NAB report. The trimmed average inflation rate in the fourth quarter is expected to be 0.6% sequentially and is expected to ease gradually, reaching 2.7% by the second half of 2025.
• Australia's Westpac Consumer Confidence Index fell 2% to 92.8 points in December, reversing two months of positive momentum.
• On Tuesday, the U.S. Census Bureau reported that U.S. retail sales rose 0.7% month over month in November. This compares to a previous increase of 0.5%. On the other hand, the retail sales management group increased by 0.4% from the previous decrease of 0.1%.
• Reuters reported on Tuesday, citing two sources, that China is targeting economic growth of about 5% in 2025. The decision follows a meeting of senior Chinese officials at the Central Economic Work Conference last week. The growth target remains unchanged from this year, and China is expected to achieve it.
• China's foreign exchange regulator, the State Administration of Foreign Exchange (SAFE), reported net outflows of $45.7 billion from China's capital markets in November. Cross-border portfolio investment receipts totaled $188.9 billion and disbursements totaled $234.6 billion, the largest monthly deficit ever in this category.
• The preliminary S&P Global U.S. Purchasing Managers' Index (PMI) for December was 56.6, up from 54.9. Meanwhile, service PMI improved from 56.1 to 58.5. The manufacturing PMI for December was 48.3, down from 49.7 last time.
• Chinese authorities, led by President Xi Jinping, have pledged to shift policy focus to consumption and raise next year's budget deficit target to boost the economy as 10% U.S. tariffs threaten exports. Given China's status as Australia's largest trading partner, the lack of concrete details on financial support has put downward pressure on the Australian dollar.

Australian dollar maintains position above 0.6200, lower limit of descending channel

AUD/USD is trading around 0.6220 on Thursday. Analysis of the daily chart suggests that a bearish bias prevails as the pair descends within a descending channel pattern. However, the 14-day Relative Strength Index (RSI) is below the 30 level, indicating oversold conditions and the possibility of an upward correction soon.

As for support, the AUD/USD pair is likely to navigate the lower bound of the descending channel around the 0.6140 level.

On the upside, the AUD/USD pair may find the first resistance near the 9-day exponential moving average (EMA) at 0.6326, followed by the 14-day EMA at 0.6362, and the upper bound of the descending channel at the 0.6400 level. Possible match. A decisive break above this channel could send the pair heading towards an eight-week high at 0.6687.

AUD/USD: daily chart