AUD/USD trades cautiously around 0.6450 ahead of RBA minutes

AUD/USD struggles around 0.6450 as the US Dollar performs strong broadly.
Trump’s economic agenda is expected to boost price pressures.
Investors await the RBA minutes for fresh interest rate guidance.

The AUD/USD pair trades with caution near 0.6450 in Monday’s European session. The Aussie pair finds temporary support but struggles to gain ground as the US Dollar (USD) remains broadly firm. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower to near 106.50 in European trading hours but remains close to its annual high of 107.00.

The optimism over President-elected Donald Trump implementing its economic agenda in his administration has kept the US Dollar on the frontfoot. Donald Trump is expected to levy hefty tariffs on imports and lower taxes, which will accelerate inflationary pressures and force the Federal Reserve (Fed) to follow a more gradual policy-easing approach.

Also, Fed Chair Jerome Powell said on Thursday that the economy has not sent any signals, which strain on cutting interest rates aggressively. However, he commented that price pressures remain on a sustainable path towards the bank’s target of 2%, which allows us to continue heading towards the neutral rate.

For the last policy meeting of this year, traders see a 65% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.

Meanwhile, the next move in the Australian Dollar (AUD) will likely occur on Tuesday after the release of the Reserve Bank of Australia (RBA) minutes of the monetary policy that took place on November 5. In the policy meeting, the RBA left its Official Cash Rate (OCR) unchanged at 4.35% and Governor Michelle Bullock delivered a hawkish interest rate guidance with concerns over upside risks to inflationary pressures.

Economic Indicator

RBA Meeting Minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.

Why it matters to traders?

The Reserve Bank of Australia (RBA) publishes the minutes of its monetary policy meeting two weeks after the interest rate decision is announced. It provides a detailed record of the discussions held between the RBA’s board members on monetary policy and economic conditions that influenced their decision on adjusting interest rates and/or bond buys, significantly impacting the AUD. The minutes also reveal considerations on international economic developments and the exchange rate value.

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