Aussie dollar trades below US$0.67

Key Movers

The US dollar gave up its early gains on the back of Friday's weaker than expected PPI readings for December with the decline in short term yields prompting a decent move higher across the board. U.S. producer prices unexpectedly fell in December amid declining costs for goods such as diesel fuel and food, suggesting inflation would continue to subside and allow the Federal Reserve to start cutting interest rates this year. The report from the Labor Department on Friday, which also showed prices for services were unchanged for the third straight month, implied that a pick-up in consumer prices last month was likely a blip. It led economists to anticipate that the key price measures tracked by the U.S. central bank for its 2% inflation target rose moderately in December from the prior month. The producer price index for final demand dipped 0.1% last month, the Labor Department's Bureau of Labor Statistics said. Data for November was revised to show the PPI falling 0.1% instead of being unchanged as previously reported. The PPI has now declined for three consecutive months.

In the UK Britain's economy grew slightly more strongly than expected in November but remains at risk of slipping into a mild recession, a potential blow for Prime Minister Rishi Sunak before an election expected in 2024. Gross domestic product (GDP) expanded by 0.3% after a fall of 0.3% in October. Sterling was little changed against the U.S. dollar after the data, but government bond yields fell as markets priced in a slightly higher chance that the Bank of England (BoE) will begin to cut interest rates in May. Britain's economy struggled to gain momentum in 2023, as households were squeezed by rapid inflation and the highest BoE interest rates in 15 years.