On February 12, Reserve Bank of Australia Deputy Governor Andrew Hauser warned that inflation remains "too high" and continues to pose a significant challenge for the rate-setting committee, which cannot allow the situation to persist for too long. Hauser's firm comments on inflation prompted a sharp rise in the Australian dollar, signaling continued upward momentum and reinforcing its status as the top-performing major currency this year.
The RBA's second-in-command made these remarks during a fireside chat in Sydney on Wednesday, noting that some price increases "reflect growing underlying pressures from rising demand meeting supply constraints in the economy." He added, "If this proves true, the risk of persistent high inflation could increase, and we cannot let that happen." Hauser attributed part of Australia's inflation pressure to the central bank's efforts to achieve a soft landing for the economy by avoiding excessive interest rate hikes in the post-pandemic period. As a result, the Australian economy is closer to balance compared to some international counterparts, though any surge in economic activity, like the one seen late last year, could push prices higher.
In other developments, the U.S. Federal Reserve is expected to keep benchmark interest rates unchanged until the end of Chair Jerome Powell's term, with rate cuts anticipated shortly after his successor takes over. A Reuters survey indicates that economists expect the Fed to hold steady until May, with cuts likely in June after Powell's departure. This outlook reflects market expectations for policy continuity as well as anticipated differences in approach between the outgoing and incoming leadership. More than 70% of surveyed economists expressed serious concerns about the erosion of the Fed's independence. President Trump last month nominated Kevin Warsh to succeed Powell, having previously criticized Powell for not cutting rates quickly enough. Economists are divided on Warsh's policy stance; while his earlier remarks leaned toward tightening, recent statements about the disinflationary effects of AI-driven productivity growth suggest he may favor rate reductions.
Key data releases to watch today include the UK December GDP monthly figure, industrial production monthly rate, goods trade balance, preliminary Q4 GDP annual growth rate, U.S. initial jobless claims for the week ending February 7, and U.S. existing home sales annualized total for January.
Gold/USD Gold edged higher yesterday, reclaiming the $5,100 level and hitting an eight-day peak, with the pair currently trading around $5,070. Persistent risk-off sentiment and continued central bank gold purchases supported the rally. However, stronger-than-expected U.S. non-farm payrolls data released during the session, which dampened expectations for Fed rate cuts, limited gold's advance. Resistance is seen near $5,150 today, with support around $5,000.
AUD/USD The Australian dollar rose yesterday, breaking above the 0.7100 threshold and currently trading near 0.7120. Hawkish comments from the RBA Deputy Governor, which boosted expectations for further rate hikes, were the main driver. Additionally, gains in commodity prices, including crude oil and international copper, provided support for the commodity-linked currency. Resistance is anticipated near 0.7200, while support lies around 0.7000.
USD/CAD The USD/CAD pair advanced slightly yesterday, closing with modest gains and currently trading near 1.3580. The move was supported by short covering and technical buying near the 1.3500 level, as well as a stronger U.S. dollar following unexpectedly strong non-farm payrolls data that further reduced expectations of Fed easing. However, rising crude oil prices, fueled by supply concerns, capped the pair's upside. Resistance is eyed near 1.3650, with support around 1.3500.