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• AUD/USD consolidates around 0.6200 amid thin trading volume following the Christmas and Boxing Day holidays.
• The RBA becomes confident over inflation easing in line with their expectations.
• The Fed turns cautious in interest rate cuts as progress in inflation towards the central bank’s target of 2% has stalled.

The AUD/USD pair trades in a very tight range near the yearly support of 0.6200 in Friday’s North American session. The Aussie pair struggles for direction as the price action is broadly muted in global markets amid thin trading volume, given that traders are busy welcoming the New Year.

The Australian Dollar (AUD) is currently exposed to a fresh downside move below 0.6200 against the US Dollar (USD) as the Reserve Bank of Australia (RBA) minutes for December’s policy meeting showed that policymakers have become confident that price pressures are easing in line with their expectations, which makes “appropriate for them” to begin relaxing the “degree of monetary policy tightness”.

This has led to an increase in RBA dovish bets. Traders expect the RBA to start reducing its key borrowing rates from the policy meeting in February.

Meanwhile, the US Dollar (USD) drops slightly, with the US Dollar Index (DXY) struggling to hold the key support of 108.00. The Greenback ticks lower while its outlook remains firm as the Federal Reserve (Fed) is expected to deliver fewer interest rate cuts in 2025.

The Fed has shifted its stance from “dovish” to “cautionary” on interest rates as progress in the disinflation trend has stalled in last three months and labor market conditions are not as bad as they appeared in the September meeting. Additionally, policymakers see incoming immigration, tariff and tax policies from the US President-elect Donald Trump as inflationary for the economy.

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