AUD/USD REFRESHES DAY HIGH ABOVE 0.6880 AS PBOC KEEPS LPR UNCHANGED

AUD/USD has printed a fresh daily high above 0.6880 as the PBoC has maintained the status quo.

A higher Australian Labor Cost Index might create more troubles for the RBA ahead.

The upside bias for the USD Index looks solid amid anxiety among the market participants due to US-China geopolitical tensions.

The AUD/USD pair has refreshed its day’s high above 0.6880 in the Asian session as the People’s Bank of China (PBoC) has kept the Loan Prime Rate (LPR) unchanged. The one-year LPR has kept stable at 3.65% and the five-year LPR is unchanged at 4.30%.

The PBoC was expected to maintain the status quo as the Chinese economy is on a path of recovery after rolling back the lockdown controls. Bloomberg reported, Goldman Sachs sees the potential for the MSCI China Index to reach 85 by the end of 2023, an increase of about 24% from current levels as the nation’s economic reopening delivers windfall profits for businesses.

It is worth noting that Australia is a leading trading partner of China and accelerating economic activities in China will support the Australian Dollar.

For further guidance, the Australian Dollar will focus on the release of the Labor Cost Index (Q4) data, which will release on Wednesday. The economic data is seen at 3.4% vs. the prior release of 3.1% on an annual basis. And the quarterly data is seen lower at 0.7% against the prior release of 1.0%. An increase in the employment cost data could strengthen the odds of a further interest rate hike by the Reserve Bank of Australia (RBA). Higher funds equipped by households would result in more consumer spending, which could accelerate Australian Consumer Price Index (CPI) further.

Meanwhile, the US Dollar Index (DXY) is struggling to stabilize above the 103.70 hurdle. The upside bias for the USD Index looks solid amid anxiety among the market participants due to US-China geopolitical tensions.