• AUD/USD trades around 0.7060 and declines about 0.25% on Wednesday.
• The US Dollar firms ahead of the FOMC minutes release.
• Markets expect a slowdown in Australian job creation in January.

AUD/USD declines and trades around 0.7060 on Wednesday at the time of writing, down 0.25% on the day, as investors remain cautious ahead of the Federal Open Market Committee (FOMC) minutes due later in the day and Australia’s employment data scheduled for Thursday.

The US Dollar (USD) strengthens ahead of the release of the January meeting account from the Federal Reserve (Fed). Investors are looking for fresh clues on the interest rate path, as markets continue to assess the timing and magnitude of potential monetary easing this year. A more cautious tone from the Fed could provide additional short-term support to the Greenback, mechanically weighing on the Australian Dollar (AUD).

At the same time, attention turns to Australia’s January employment report. Economists expect around 20,000 new jobs, a significantly lower figure than the increase recorded in December, while the Unemployment Rate is seen edging up to 4.2% from 4.1% previously. Signs of moderation in the labor market could reduce expectations of further rate hikes by the Reserve Bank of Australia (RBA), thereby limiting the Aussie’s rebound potential.

BNY notes that the Westpac-Melbourne Institute Leading Index slowed sharply in January, signaling a loss of momentum in the Australian economy despite support from commodity prices. According to Bob Savage, Head of Markets Macro Strategy at BNY, the RBA maintains a tightening bias if data allow, but the slowdown in growth dynamics suggests that tighter financial conditions could weigh more heavily on activity.

In this context, the combination of a firmer US Dollar ahead of the FOMC minutes and cautious expectations for Australian employment keeps AUD/USD under short-term pressure, as traders await clearer macroeconomic catalysts to define the next directional move.