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Aussie spikes on “targeted” tariff hopes, but gains mostly short lived

Tarriff story denied. FOMC minutes to reveal committee split. Philippines inflation expected to tick up.

Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist

Tarriff story denied

The US dollar tumbled and the Aussie spiked higher overnight on a Washington Post report that the incoming Trump administration was looking at imposing tariffs only on limited “critical” imports. However, the report was quickly rejected by president-elect Trump.

The AUD/USD jumped as much as 1.4% – hitting a three-week high – before quickly reversing back lower. The AUD/USD ended the session up 0.4%.

We saw similar move in other regional markets with the USD initially lower before rebounding.

The NZD/USD gained 0.4%, USD/SGD fell 0.5% while USD/CNH fell 0.2%.

Otherwise, the main focus overnight was on Cananda as prime minter Justin Trudeau resigned after nine years in power. The Canadian dollar jumped and USD/CAD fell to the lowest level in three weeks, although these markets were also impacted by the earlier tariff story.

FOMC minutes to reveal committee split

The US dollar’s overnight losses were more interesting in the light of this week’s FOMC minutes.

The FOMC minutes will probably show how split the committee is on the policy action and the forecast for 2025, notwithstanding the Fed’s “hawkish cut” at the December meeting.

The distribution of the federal funds rate estimates indicates that there were three more “tacit” dissents among FOMC participants, despite the fact that Cleveland Fed President Hammack was the only member to oppose the rate cut of 25 basis points during the meeting.

San Francisco Fed President Daly called the 25-basis point rate drop “a close call,” implying that other policymakers would have chosen to maintain the policy rate at its current level.

Discussions on how FOMC members factor in prospective changes to fiscal policy in their view for 2025 may also be disclosed in the minutes.

The overnight move the in greenback has seen the USD index slip into a short-term downtrend but the long-term trend remains clearly higher.

Philippines inflation expected to tick up

Today, the Philippines’ CPI will be made public. Due to weather-related supply delays and increased energy costs, we anticipate headline CPI inflation to slightly increase from 2.5% in November to 2.6% in December. However, decreased rice prices should continue to act as an offset. 

Our view for the peso is a little bleak. The BSP has enough reserves to handle modest shortfalls, but recent current account deficits have surpassed sustainable levels.

The next resistance for USD/PHP is at 58.71 providing an opportunity for PHP buyers. 

Aussie spikes, but gains short lived

Table: seven-day rolling currency trends and trading ranges  

Key global risk events

Calendar: 6 – 11 January

All times AEDT

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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.

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