AUSTRALIAN DOLLAR PARES GAINS AMID IMPROVED US DOLLAR, AWAITS US PCE

• The Australian Dollar remains firmer due to the hawkish sentiment surrounding RBA’s rate trajectory.
• The Australian Dollar gains in response to the Aussie 10-year yield hitting a 21-week high of 4.59%.
• The rebound of the US Dollar could be attributed to a shift in market sentiment toward risk-off.

The Australian Dollar (AUD) continues its upward trend for the fifth consecutive session on Friday. The Australian Dollar (AUD) gains momentum against the US Dollar (USD) amid growing support for a hawkish stance from the Reserve Bank of Australia (RBA). This sentiment is strengthened by the reassessment by TD Securities, pushing back the anticipated rate cut by the RBA to February 2025 from November.

The Australian Dollar strengthened further on the back of rising yields in Australian government bonds, with the 10-year yield hitting a 21-week high of 4.59%. This surge is attributed to the recent release of Australia's Consumer Price Index (CPI) data on Wednesday, which surpassed expectations and triggered a hawkish sentiment surrounding the RBA.

The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against six major currencies, rebounds, potentially influenced by a shift toward risk-off sentiment. However, this gain could be limited due to the downward correction in US Treasury yields, which contributed to the weakening of the Greenback.

Despite mixed preliminary data released from the United States (US) on Thursday, including higher-than-expected Core Personal Consumption Expenditures and lower-than-expected Gross Domestic Product Annualized for the first quarter, the US Dollar remained subdued.

Market attention now turns to the US Personal Consumption Expenditures (PCE) Price Index data for March, scheduled for release on Friday. This data is anticipated to draw significant focus as investors gauge its implications for inflationary pressures and potential impacts on US monetary policy.