AUD/USD holds below 0.6200 ahead of Trump's inauguration

• AUD/USD softens to near 0.6190 in Monday's early Asian session. 
• The Fed is anticipated to hold rates steady in the January meeting. 
• Trump's tariff threat could put pressure on the Aussie. 

The AUD/USD pair weakens to around 0.6190, snapping the two-day losing streak during the early Asian session on Monday. The markets turn cautious as President-elect Donald Trump will be inaugurated later on Monday. The US market is closed on Monday due to the Martin Luther King Day bank holiday.

Concerns around Trump's pledges, including tariffs, extending tax cuts, and deportations of illegal immigrants, have contributed to a rise in US Treasury yields and the Greenback before he takes office. Analysts believe that the US Federal Reserve (Fed) future interest rate path will depend on how aggressively the incoming Trump administration follows through on those pledges. 

Investors will closely monitor Trump's executive orders, which he plans to issue just hours after he is sworn into office. The Fed is expected to hold interest rates unchanged at its January meeting and resume the reductions in March, according to a slim majority of economists polled by Reuters. 

The possibility of renewed trade tensions between the US and China and the potential of Trump's higher tariffs could exert some selling pressure on the Australian Dollar (AUD) as China is a major trading partner to Australia. However, the upbeat Chinese economic data on Friday could support the Australian Dollar (AUD). China's economy grew 5.4% YoY in the fourth quarter (Q4) of 2024, compared to a 4.6% expansion in Q3. This reading came in stronger than the 5% expected by a wide margin.