AUSTRALIAN DOLLAR PULLS BACK DUE TO AN UPWARD CORRECTION IN THE US DOLLAR

• The Australian Dollar retreated due to the improved US Dollar on Friday.
• The Australian Dollar is facing pressure due to the less hawkish stance of the RBA on monetary policy.
• The US Dollar rebounded due to the hawkish Fed to maintain higher interest rates for a longer period.

The Australian Dollar (AUD) is retracing its recent gains on Friday, following a rally on Thursday. The rally was propelled by a decline in the US Dollar (USD) as weak US Initial Jobless Claims indicated a more dovish outlook for the Federal Reserve (Fed). This helped offset pressure on the Aussie Dollar resulting from the Reserve Bank of Australia (RBA)'s less hawkish stance, especially in light of the higher-than-expected inflation data.

The Australian inflation rate dropped to 3.6% in the first quarter, from 4.1% in the previous quarter, marking the fifth consecutive quarter of slowing. However, it exceeded forecasts of 3.4%. Additionally, the Monthly Consumer Price Index (YoY) for March surged to 3.5%, surpassing the expected reading of 3.4%. The Reserve Bank of Australia (RBA) acknowledged that recent progress in controlling inflation has stalled and maintained its stance of keeping options open.

The US Dollar Index (DXY), which gauges the performance of the US Dollar (USD) against six major currencies, attempts to rebound due to the sentiment of the Federal Reserve (Fed) maintaining higher interest rates for longer. However, the decline in the US Treasury yields could contribute to pressure on the Greenback, supporting the AUD/USD pair.

In the United States (US), the preliminary Michigan Consumer Sentiment Index for May is set to be released on Friday, with expectations for a slight decrease. This index is a survey that measures sentiment among US consumers, covering three main areas: personal finances, business conditions, and buying conditions. Additionally, Chinese Consumer Price Index (CPI) data is expected on Saturday, which could have an impact on the Australian Dollar (AUD) as Australia and China share close trading ties