The increased risk appetite is a major reason why the AUDUSD has rallied
As the market remains cautious, the Australian dollar rallies. The US dollar’s softness may continue to provide tailwinds despite lacklustre domestic data. Australia’s retail sales saw its biggest drop in over two years in December as the economy is feeling the pinch of the tightening. Further falls in house prices could further hurt consumer sentiment. Still, the full impact of last year’s rate hikes is yet to be seen, signs of a noticeable slowdown may prompt traders to pare back their peak rate expectations. The upcoming meeting has already been set up for a 25-bp increase. They are heading towards 0.7280 With 0.6880 As the first support.
USDCAD struggles as Canada’s economy shows resilience
As Canada’s economy is likely to avoid mild recession, the Canadian dollar has risen. Cooling inflation has given the BoC some leeway to halt its monetary tightening. Market participants would shift their focus from the inflation impact to the actual economic impact of major central banks as they enter the final stage of their hike cycle. Despite a steep rise in borrowing costs, Canada’s growth and employment have been resilient. If the predicted recession does not materialize, then the…