●Australian dollar weakens against greenback as risk sentiment sours
●Mixed US consumer data shows rising inflation expectations despite sentiment drop
●RBA acknowledges inflation persistence while maintaining hawkish stance
The Australian dollar continues its defensive posture against the US dollar in early Asian trading sessions, with the currency pair hovering near 0.6355. Market participants attribute this weakness to multiple factors including China's economic slowdown concerns and the relative strength of US Treasury yields. The commodity-linked currency remains vulnerable to shifts in global risk appetite.
Recent economic indicators from the United States present a complex picture for monetary policy. The University of Michigan's consumer sentiment index recorded its lowest level this year at 60.4, down from October's 63.8 reading. However, inflation expectations moved in the opposite direction, with the one-year outlook climbing to 4.4% and the five-year projection reaching an 11-year high of 3.2%. These conflicting signals complicate the Federal Reserve's policy calculus as it balances growth concerns against inflation risks.
Market pricing currently suggests minimal expectations for additional Fed rate hikes in December, with CME FedWatch tools indicating just 14.4% probability. Fed Chair Jerome Powell's recent comments maintain optionality for further tightening if inflation proves stubborn. This week's US CPI release assumes critical importance, potentially validating or challenging current market expectations. Economists anticipate headline inflation to moderate to 0.1% monthly growth in October from September's 0.4% pace, while core measures may hold steady at 0.3%.
Australia's central bank struck a cautiously optimistic tone in its latest Monetary Policy Statement, acknowledging that inflation has peaked but remains elevated compared to forecasts. The RBA emphasized data dependence in determining whether additional policy tightening becomes necessary, with particular focus on services inflation and wage growth dynamics. Market participants will scrutinize upcoming Australian consumer confidence data alongside global risk trends for directional cues on the currency pair.
Technical analysts note that the AUD/USD pair faces immediate resistance near the 0.6380 level, with support emerging around 0.6320. A decisive break below this support zone could open the door for further downside toward the 0.6270 area. Traders remain cautious ahead of key data releases that could reshape interest rate expectations for both currencies.
