AUD/USD remains muted above 0.6900 despite PBOC keeps PLR unchanged

• AUD/USD has continued its sideways performance above 0.6900 despite unchanged monetary policy by the PBoC.
• The street was expecting a dovish monetary policy to strengthen reopening reforms in China.
• Investors’ risk appetite is improving as the S&P500 futures have displayed signs of recovery.

The AUD/USD pair has not displayed a meaningful response despite the People’s Bank of China (PBoC) has kept the one-year and five-year Prime Lending Rates (PLR) unchanged. The street was expecting a dovish monetary policy from the PBoC as the Chinese economy needs to be injected with significant liquidity. The economy is recovering from turbulent times due to lockdown curbs to contain the Covid-19 epidemic. Also, the vulnerable real estate market could be supported by deploying stimulus boosts or easy money.

Investors should be aware that Australia is a leading trading partner of China and an absence of dovish monetary policy from the PBoC at the current juncture could impact the Australian Dollar.

On Thursday, the Aussie asset witnessed a steep fall after the release of the downbeat Australian Employment data. Australian labor market witnessed a lay-off of 14.6K employees in December while the street was expecting an addition of fresh 22.5k jobs. Also, the Unemployment Rate has climbed to 3.5% vs. the expectation and the prior release of 3.4%.

A higher jobless rate might impact the robust consumer spending in the Australian economy, which might trim inflation expectations ahead and may ease troubles for Reserve Bank of Australia (RBA) policymakers. RBA Governor Philip Lowe has already pushed the Official Cash Rate (OCR) to 3.10% and is expected to hike interest rates further in its February monetary policy meeting.

Meanwhile, caution in the risk impulse has diminished as the S&P500 futures are delivering some gains after a three-day losing streak. The 10-year US Treasury yields are aiming to sustain above 3.40% as Federal Reserve (Fed) Vice Chair Lael Brainard stated "Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2 percent on a sustained basis,"

After a hawkish commentary from a Fed policymaker, the US Dollar Index (DXY) has attempted a recovery move after dropping to near 101.60.