During Wednesday’s trading session, the AUD/USD is experiencing gains, currently hovering around the 0.6843 level. These movements are primarily driven by the escalating expectations of a dovish stance from the Federal Reserve (Fed), exerting downward pressure on the US Dollar. Consequently, the Australian dollar is surpassing its US counterpart as the year winds down.

Furthermore, there is anticipation in the markets for six interest rate cuts in 2024, seemingly disregarding statements made by US Federal Reserve members post-December’s interest rate decision and the subdued readings of the Consumer Price and Personal Consumption Expenditures indexes from November. Investors’ confidence in the Fed adopting a dovish stance next year is influencing expectations of further downsides for the US Dollar.

In line with these developments, US Treasury yields are on a downward trajectory, diminishing the appeal of the Greenback. The 2-year rate is currently at 4.26%, marking its lowest level since May, while the 5-year and 10-year rates both stand at 3.84%, also hitting multi-month lows.