AUD/USD finds support around US$0.6270 as the US dollar retreats on easing US-Colombia trade war fears

Daily Currency Update

The AUD/USD pair claws back some of its intraday losses after falling near US$0.6270 in the European session on Monday but is still down by about 0.2%. The Aussie strengthens as the US dollar reverses its gains and slips into the red, with the US Dollar Index (DXY) pulling back to a five-week low of 107.20 from an intraday peak of 107. The US dollar saw safe-haven demand increase off the back of concerns of a potential trade war following President Donald Trump’s suggested 25% tariffs on Colombia, albeit these gains were short-lived.

This week, all eyes will be on the US dollar as we await the Federal Reserve’s Monetary policy decision on Wednesday. The market expectation points to rates being kept steady in the range of 4.25%-4.50%. Meanwhile, on the Australian dollar side, market participants will keep a close eye on Q4 inflation data expected on Wednesday. As indicated by the Consumer Price Index (CPI), weak inflation data could lead to the expectation that the Reserve Bank of Australia will begin easing its restrictive policies from the February meeting. However, stronger-than-expected inflation would likely have the opposite effect, reinforcing the case for keeping policies tight.