**AUD/USD Slides as Australian Trade Surplus Narrows and Inflation Slows**
*Based on reporting by FXStreet’s Harshita Tyagi, with additional context and analysis*
**Overview**
The Australian dollar (AUD) recently suffered a downturn against the US dollar (USD), with the AUD/USD pair slipping lower in currency markets. The decline has been predominantly driven by softer macroeconomic data out of Australia, highlighted by a narrowing trade surplus and a recent moderation in inflation figures. These economic signals have raised doubts about the Reserve Bank of Australia’s (RBA) interest rate trajectory while simultaneously bolstering the greenback, whose strength is underpinned by robust US economic data and cautious sentiment among Federal Reserve policymakers. This article provides a comprehensive analysis of the factors influencing the AUD/USD pair, drawing on the latest news and adding further context to guide traders and investors.
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### Recent Price Action: AUD/USD Under Pressure
– The AUD/USD pair experienced a sharper decline after reports of a reduced trade surplus and slowing inflation numbers from Australia.
– The currency pair is currently trading near multi-week lows, slipping below the 0.6700 level as of the latest market session.
– Selling pressures on the AUD have increased against the backdrop of improved demand for the USD and shifting expectations regarding Australian monetary policy.
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### Australian Economic Data in Focus
**Shrinking Trade Surplus**
– Australia’s trade surplus narrowed more than anticipated in the most recent monthly report.
– According to the Australian Bureau of Statistics (ABS), the trade surplus fell from AUD 7.1 billion in October to AUD 7.1 billion in November, compared to the expected AUD 7.5 billion.
– Exports, particularly driven by commodity shipments such as iron ore and coal, experienced a less dramatic rise compared to imports, squeezing the trade balance.
– The trade balance is a key support for the Australian dollar; a shrinking surplus tends to weigh on the currency as it signals potential headwinds for export earnings and the broader economy.
**Slower Pace of Inflation**
– Australia’s consumer price index (CPI) for the fourth quarter indicated a moderation in inflation:
– The annual inflation rate dropped to 4.3 percent from a previous reading of 4.9 percent.
– Core inflation also showed signs of cooling, reducing perceived pressure on the RBA to act aggressively on interest rates.
– A sustained easing in inflation typically lessens the urgency for central banks to tighten policy, thereby dampening expectations for further rate hikes.
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### Reserve Bank of Australia: Policy Implications
**Diminished Hawkish Expectations**
– Both the narrowing trade surplus and the easing in inflation have cast doubt over the likelihood of additional RBA rate hikes in the near term.
– Many investors and market participants now project that the RBA will keep its benchmark cash rate steady at 4.35 percent for the foreseeable future.
– Any further appreciable slowdown in economic data could even bring rate cut speculation
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