Aussie drifting, Trump to speak at World Economic Forum

The Australian dollar has been drifting since Monday when it posted huge gains of 1.4%. Early in the North American session, AUD/USD is trading at 0.6273, up 0.02% at the time of writing.

In the US, unemployment claims rose to 223,000 in the period ending Jan. 18. This was up by 6,000 from the previous week and slightly higher than the market estimate of 220 thousand. It marked the sharpest rise in six weeks but the Federal Reserve won't be too worried, as the jobless claims four-week average, which smooths out sharp weekly moves, showed little change from the previous release.

The Federal Reserve has sounded more hawkish recently, as the US economy continues to hum. In September 2024, the Fed had projected that it would lower interest rates four times in 2025 but lowered that forecast in December to just two hikes. After a better-than-expected nonfarm payrolls report in December, Bank of America said that the easing cycle is over and it expected the next rate move to be a hike. That won't be good news for consumers and businesses which continue to be squeezed by high inflation and elevated borrowing costs.

It is unlikely that the Fed will raise rates in the coming months. The Fed is virtually certain to maintain rates at next week's meeting and the markets have priced a quarter-point cut in March at 26%, according to the CME's FedWatch. That could change if the labor market shows unexpected deterioration or inflation rebounds higher.

President Trump will address the World Economic Forum (WEF) later today. The new US President had originally threatened to levy trade tariffs against US trading partners immediately after taking office but announced that he would delay those plans. The announcement sent the US dollar sharply lower against most of the major currencies on Monday and the Australian surged 1.4% against the greenback. The market's relief could be short-lived, however, as Trump has stated that he is looking to impose the tariffs on Feb. 1. If Trump reiterates this threat at the WEF, we could see a sharp response from the financial markets following the speech.

• 0.6306 and 0.6366 are the next resistance lines
• 0.6250 and 0.6190 and the next support levels