AUD/USD continues to lose ground for the fifth successive day, trading around 0.6220 during the Asian session on Friday. The AUD/USD pair moves downwards as the US Dollar (USD) receives support from growing expectations of fewer rate cuts by the US Federal Reserve (Fed). In its December meeting, the Fed reduced interest rates by a quarter point and revised its 2025 projection to include only two rate cuts, down from the previously forecasted four.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades above 108.00, slightly below its highest level since November 2022. However, the upside of the Greenback could be restrained as 2-year and 10-year yields on US Treasury bonds remain subdued at 4.32% and 4.57%, respectively, at the time of writing.

The Australian Dollar (AUD) faces pressure as the Reserve Bank of Australia (RBA) hints at potential rate cuts in 2025, with markets projecting a reduction to 3.6% by year-end. According to the latest RBA monetary policy minutes, the central bank appears increasingly confident that inflation is on a sustainable path toward its target.

Additionally, the AUD struggles due to increased risk aversion and growing concerns about China's economic health, a crucial factor given that China is Australia’s largest trading partner. However, the World Bank raised its growth forecast for China in 2024 and 2025 but cautioned that weak confidence and challenges in the property sector will continue to pressure the economy.

Traders were focused on China’s recent economic measures, including reports that officials have more flexibility to use government bond proceeds to stimulate growth, potentially boosting Oil demand from the leading consumer.

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