21/02/25

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The Australian Dollar has seen a decline against the US Dollar, influenced by a technical rebound in the latter. Recent data from Judo Bank indicates some strengthening in the Australian manufacturing sector, with its Purchasing Managers Index (PMI) rising to 50.6 in February from January’s 50.2. Additionally, the Services PMI and Composite PMI also showed slight improvements. However, the Reserve Bank of Australia’s (RBA) Governor Michele Bullock has warned that an aggressive cut in monetary policy could disrupt the ongoing disinflation process, leaving inflation above target levels.

As the US Dollar Index measures strength against a basket of major currencies, it has tracked upward, nearing 106.50 recently. Yet, it faced headwinds from disappointing jobless claims data, which depicted a mixed employment picture. Initial jobless claims rose to 219,000, surpassing expectations, while continuing claims slightly decreased but remained high.

Concerns over US inflation persist, with Federal Reserve officials noting the uncertainty surrounding the path to the 2% target. Various members of the Fed have expressed mixed views, with some hinting at potential rate cuts while others caution about looming stagflation risks. This conflicting guidance adds to market volatility as investors await clearer signals regarding economic conditions.

On the trade front, discussions regarding a new deal with China are under development, with expectations for a visit from President Xi Jinping. Potential tariffs on lumber, pharmaceuticals, and semiconductor imports have been proposed, further complicating global trade dynamics.

Meanwhile, Australia’s unemployment rate increased to 4.1%, which aligns with market predictions, while employment growth figures surpassed expectations despite a decline from the previous month. The RBA made its first interest rate cut in four years, lowering the Official Cash Rate to 4.10%. Governor Bullock emphasized the importance of caution, suggesting that the financial landscape remains challenging, and future rate cuts are not assured despite market speculation.

The AUD/USD pair is navigating around the 0.6400 level while showing bullish tendencies. A stronger resistance is noted at 0.6400, with potential support residing at the nine-day Exponential Moving Average of 0.6350. This will be key for traders as market sentiment continues to evolve amid global economic uncertainties.