• Australian Dollar extends gains as the RBA is expected to raise interest rates even further.
• Australia's S&P/ASX 200 Index tracks declines in the financial-linked shares, outweighing iron ore miners.
• CME FedWatch Tool suggests the probability of a rate cut in March and May has decreased to 1.0% and 9.6%, respectively.

The Australian Dollar (AUD) continues to advance for the second consecutive day on Thursday. The AUD/USD pair strengthens due to expectations of the Federal Reserve (Fed) initiating interest rate cuts in June, while the Reserve Bank of Australia (RBA) continues to suggest it may need to raise rates even further. RBA Governor Michelle Bullock recently stated that inflation in Australia is primarily "homegrown" and "demand-driven," attributable to the strength of the labor market and increasing wage inflation. The RBA does not anticipate this phenomenon occurring until 2026.

Australian Dollar may face downward pressure due to the lower S&P/ASX 200 Index, driven by declines in the financial sector that outweigh the gains in iron ore miners. Shares linked to the Australian financial sector, including Westpac Banking, Commonwealth Bank, ANZ Group, National Australia Bank, and Macquarie Group, are leading the losses. Traders are awaiting the release of the US Core Producer Price Index (PPI) and Retail Sales data scheduled for Thursday, which could further influence market sentiment and the direction of the AUD/USD pair.