AUD/USD hits fresh five-month high on weaker US dollar

The AUD/USD pair is surging due to traders’ speculations that the US Fed would shift dovish. The US 10-year Treasury bond yield continues to edge lower, eyeing the 3.50% threshold and weighing on the USD.

The AUD/USD pair sharply soars above the 0.6900 figure on speculations that the Fed would change its tightening monetary pace, so a less hawkish Fed is anticipated and as a result the US Dollar weakened. US Treasury yields are dropping toward the 3.50% region while global equities continue to rise. At the time of writing, the AUD/USD is trading at 0.6948, above its opening price by 1.11%.

Wall Street extends its gains on Monday, ahead of the first release of US earnings. Inflation expectations in the United States (US) revealed by a New York Fed survey showed that consumers for one-year-ahead inflation decelerated to 5% in December, on its lowest reading since July 2021. However, estimates for the three-year period were unchanged at 3%, while for a longer term, they edged 0.1% up to 2.4%.

Aside from this, the US Dollar is edging down by 0.84%, as the US Dollar Index (DXY) shows, at 103.036, weakened by investors assessing a possible Fed pivot, as shown by US Treasury bond yields pushing lower, down at 3.523%.

Earlier in the Asian session, the Australian docket featured Building Permits for November, flashing a weaker housing as permits plummeted -9.0% below estimates for a -1.0% contraction, though AUD/USD traders mainly ignored data.

Reports from China added to an upbeat sentiment, suggesting that the country will boost the issuance of special local government bonds to a record high of CNY 3.8 trillion. Senior PBOC official Guo said growth would soon return to “normal” as policymakers support households and private companies more. Guo added that “The key to the economic recovery is to convert current total income to consumption and investment to the largest possible extent.”