The Australian Dollar (AUD) halted its two-day losing streak against the US Dollar (USD) on Monday (1/20), receiving support from rising metal prices. However, the upside in the AUD/USD pair may remain limited as the US Dollar (USD) could strengthen amid market caution ahead of President-elect Donald Trump's inauguration later in the day. US markets will remain closed on Monday for the Martin Luther King Jr. holiday.
The People's Bank of China (PBOC) announced on Monday that it will keep the Loan Prime Rate (LPR) unchanged. The one-year Loan Prime Rate (LPR) remains at 3.10%, while the five-year LPR is at 3.60%. As China and Australia are close trading partners, any changes in the Chinese economy could impact the Australian market.
The AUD also strengthened on strong Chinese economic data. China's Gross Domestic Product (GDP) grew 5.4% year-on-year in the fourth quarter of 2024 after reporting a 4.6% expansion in the third quarter. The data beat market consensus of 5% in the reported period, by a wide margin. Additionally, December's annual Retail Sales increased by 3.7% compared to 3.5% and 3.0% previously, while Industrial Production came in at 6.2% compared to 5.4% and 5.4% in November.
The Australian dollar could face challenges as market expectations grow that the Reserve Bank of Australia (RBA) may start cutting interest rates as early as next month. Traders are now focusing on Australia's quarterly inflation report, due next week, for clues on the future direction of interest rates. (AL)
Source: FXstreet
