AUSTRALIAN DOLLAR CONTINUES TO LOSE GROUND DUE TO THE FIRMER US DOLLAR

• The Australian Dollar depreciates due to the dovish sentiment surrounding the RBA.
• Australia's Treasury announced that inflation could re-enter the RBA target range by the end of 2024.
• The US Dollar received support from the cautious comments from Fed officials regarding interest rate cuts.

The Australian Dollar (AUD) extended its losses on Monday, possibly due to the Reserve Bank of Australia (RBA)'s less hawkish stance after it decided to keep its interest rate unchanged at 4.35% on Tuesday. Markets were speculating that the RBA might adopt a more hawkish stance, fueled by last week's inflation data, which exceeded expectations.

Australia's Treasury announced on Sunday that they forecasted that inflation could re-enter the Reserve Bank of Australia's (RBA) target range by the end of 2024. In their December outlook, officials predicted that CPI inflation would decrease to 3.75% by mid-2024 and 2.75% by mid-2025, aligning it with the RBA's target range.

The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, continues to gain ground as traders digest Friday’s key economic data and cautious comments from Federal Reserve (Fed) officials regarding interest rate cuts. However, the downward correction in the US Treasury yields could limit the advance of the Greenback.

In the United States (US), investors are geared to focus on pivotal economic indicators that could serve as significant market catalysts this week. Key highlights include the Producer Price Index (PPI) scheduled for release on Tuesday, followed by the Consumer Price Index (CPI) and Retail Sales reports on Wednesday.