- AUD/USD holds above 0.6800 amid the USD weakness.
- US Q3 GDP grew at a 4.9% annualized rate, missing the expectation of 5.2%.
- The RBA indicated in its December minutes that there are upside risks of inflation, and the policy setting will depend on the incoming data.
- The US Core Personal Consumption Expenditure Price Index (Core PCE) will be in the spotlight on Friday.
The AUD/USD pair gains ground above the 0.6800 mark, the highest in five months during the early Asian session on Friday. The uptick of the pair is bolstered by the softer US Dollar (USD) and risk appetite. At press time, AUD/USD is trading at 0.6801, down 0.02% on the day.
On Thursday, the new estimate of the US Gross Domestic Product (GDP) Annualized for the third quarter (Q3) expanded 4.9%, below the market consensus of 5.2%. Additionally, the weekly Initial Jobless Claims for the week ending December 16 came in at 205,000 from 203,000 in the previous week. The Philadelphia Fed Manufacturing Index fell to -10.5 in December from -5.9 in November.
The Federal Reserve (Fed) delivered a dovish tone last week while indicating that the hiking cycle is done and rate cuts are on the cards next year. Fed Chair Jerome Powell did not declare victory over inflation and reiterated that the central bank wants to see further evidence of falling inflation before it would feel confident that it is sustainably headed back to the 2% target. Traders will take more cues from the US Core Personal Consumption Expenditure Price Index (Core PCE) due later on Friday.
The Reserve Bank of Australia (RBA) decided to hold the cash rate at 4.35% amid the "encouraging signs" of the inflation battle. However, the RBA indicated in its December minutes there are risks that inflation will hold above the 2%-3% target for longer than expected. The central bank will wait for further data to assess how the balance of risks was evolving.
Australia will release Private Sector Credit data on Friday. Market players will closely monitor the US Core PCE, the Fed’s preferred inflation gauge, which is expected to rise 3.3%. Also, the University of Michigan Consumer Confidence Survey, Durable Goods Orders report, and New Home Sales data will be released later on Friday. These figures could give a clear direction to the AUD/USD pair.
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