- Australian Dollar could continue its downward trajectory.
- Australia’s central bank adopted a dovish stance in their recent meeting.
- US Dollar seems lukewarm, despite the positive tone of US bond yields.
- Biden-Xi meeting is scheduled for Wednesday, marking their first in-person meeting in a year during.
The Australian Dollar (AUD) aims to continue a week-long slump while the US Dollar (USD) keeps weakening on Monday despite higher US Treasury yields. However, the AUD/USD pair feels the squeeze after the Reserve Bank of Australia (RBA) struck a dovish chord in their recent meeting.
Australia’s central bank issued its Monetary Policy Statement (MPS) last Friday, indicating the hurdles posed by stubborn inflation and a sluggish Australian economy. The RBA has its sights set on realigning inflation with its target. After careful consideration, the idea of hitting the pause button was on the table in November, but the RBA leaned towards the confidence of a rate hike as a more effective measure to tackle inflation concerns.
The RBA board is not turning a blind eye to the financial struggles faced by many households at the moment. Budgets feel the squeeze. Interestingly, the Reserve Bank of Australia (RBA) is painting a mixed picture by upping its forecasts for both inflation and GDP growth. At the same time, projections for unemployment and wages are taking a downward adjustment.
The upcoming US-Sino Presidential meeting is on the horizon, and President Joe Biden aims to rebuild military-to-military connections with China. White House national security adviser Jake Sullivan shared this insight in a Sunday interview with CBS. The much-anticipated face-to-face between Biden and Chinese President Xi Jinping is scheduled for Wednesday, marking their first in-person meeting in a year during the Asia-Pacific Economic Cooperation summit in San Francisco.
Additionally, the Biden-Xi meeting is set to delve into a spectrum of global issues, spanning from the Israel-Hamas conflict to Russia’s invasion of Ukraine, fentanyl production, and discussions around artificial intelligence. Additionally, the agenda includes addressing “fair” trade and economic relations between the two nations.
Federal Reserve (Fed) Chair Jerome Powell surprised in his speech on Thursday, taking a more hawkish stance than anticipated. Powell expressed concerns that the current policies might not be restrictive enough to reel inflation to the coveted 2.0% target. However, the market vibe suggests a widespread belief that the Fed has wrapped up its tightening cycle.
However, on Friday, the Greenback faces a challenge after the preliminary US Michigan Consumer Sentiment data for November showed a dip in the mood among consumers in the United States (US). It fell to 60.4 from 63.8 in the previous month.
AUD/USD traders await the Westpac Consumer Confidence on Tuesday. On the US side, all eyes will likely be on the US Consumer Price Index (CPI) on the same day. Meanwhile, China’s Industrial Production and Retail Sales will be released on Wednesday.
Daily Digest Market Movers: Australian Dollar moves sideways, looks for fresh impetus
- RBA increased the Official Cash Rate (OCR) from 4.10% to a 12-year high of 4.35%, responding to the latest Monthly Consumer Price Index (YoY) for September, which indicated a notable increase of 5.6% compared to the expected 5.4% growth.
- Australia’s TD Securities Inflation (YoY) eased at 5.1% in September from 5.7% prior.
- Australia’s Retail Sales grew 0.2% in the third quarter after contracting by 0.6% in the previous quarter.
- Economists at the National Australia Bank (NAB) anticipate another 25 basis points hike in February following the Q4 inflation data. Additionally, NAB believes rate cuts will unlikely commence until November 2024.
- China’s Consumer Price Index (CPI) witnessed an annual decline of 0.2% in October, compared to the expected 0.1% decrease. The monthly CPI dropped by 0.1%, contrasting with the earlier 0.2% growth. A weaker economic scenario in China casts a shadow over the Aussie Dollar (AUD), given Australia’s heavy reliance on its largest trading partner.
Technical Analysis: Australian Dollar hovers around 0.6350 with a negative tone
The Australian Dollar walks on a tightrope above the crucial support level of 0.6350 on Monday. A decisive break below might set the AUD/USD pair on a downward journey, eyeing the two-week low at 0.6314. On the flip side, the 14-day Exponential Moving Average (EMA) at 0.6387 poses as the initial resistance, followed by the 23.6% Fibonacci retracement at 0.6413, and the psychological hurdle at 0.6500.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Pound Sterling.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.03% | -0.03% | 0.12% | 0.06% | 0.15% | 0.01% | 0.02% | |
EUR | -0.03% | -0.06% | 0.09% | 0.03% | 0.12% | -0.03% | 0.00% | |
GBP | 0.03% | 0.06% | 0.15% | 0.09% | 0.18% | 0.03% | 0.05% | |
CAD | -0.11% | -0.08% | -0.14% | -0.06% | 0.04% | -0.10% | -0.09% | |
AUD | -0.05% | -0.03% | -0.09% | 0.06% | 0.09% | -0.04% | -0.03% | |
JPY | -0.15% | -0.13% | -0.19% | -0.03% | -0.09% | -0.15% | -0.12% | |
NZD | -0.03% | 0.02% | -0.04% | 0.10% | 0.04% | 0.14% | 0.01% | |
CHF | -0.03% | 0.00% | -0.05% | 0.09% | 0.03% | 0.12% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Credit: Source link