- Australian Dollar gains ground after China’s interest rate decision.
- Australia’s Dollar receives upward support due to the downbeat Greenback.
- PBoC kept LPR unchanged at 3.45% as expected.
- US Dollar plunged on Friday despite upbeat US housing data.
The Australian Dollar (AUD) receives upward support after China’s interest rate decision. The People’s Bank of China (PBoC) kept its loan prime rate (LPR) unchanged at 3.45% as expected. However, the AUD/USD pair faced a challenge as the US Dollar (USD) attempted to rebound from a two-month low recorded on Friday.
Australia’s central bank is expected to hike again in the first half of 2024. The Reserve Bank of Australia (RBA) Assistant Governor Marion Kohler mentioned that inflation is expected to decrease but won’t hit the RBA’s 2%-3% target until the end of 2025. Investors will likely focus on the RBA Meeting Minutes and RBA Governor Bullock’s speech on Tuesday.
Australia’s Dollar (AUD) might have gained support as the United States (US) reported soft inflation figures and weak economic activity, contributing to a decline in the Greenback. Signs of inflationary pressures and a cooling labor market in the US led markets to believe that the Federal Reserve (Fed) may have concluded its hiking cycle, causing the US Dollar (USD) to weaken over the previous week.
US Dollar Index (DXY) continues to lose ground for the second successive session due to the pressure on the US Treasury yields. The yield on the 2-year Treasury note stands lower at 4.88%, down by 0.10%, by the press time. US Dollar (USD) faced pressure despite upbeat US housing data released on Friday. Building Permits (MoM) improved to 1.487M against the market consensus of 1.450M for October. Housing Starts (MoM) rose to 1.372M from the previous figure of 1.346M.
Boston Federal Reserve (Fed) President Susan Collins expressed optimism on Friday that the Fed can lower inflation without causing significant damage to the labor market by being “patient” with further interest rate moves. The Federal Open Market Committee (FOMC) minutes on Tuesday are expected to provide some insights into the Fed’s stance on inflationary pressure and its approach to monetary policy.
Daily Digest Market Movers: Australian Dollar trades higher after China’s interest rate decision
- Australia’s seasonally adjusted Employment Change reported an increase of 55K in October, compared with the market anticipation of 20K and 6.7K in the previous month.
- Aussie Unemployment Rate came in at 3.7% in October as expected against the previous figure of 3.6%.
- Australia’s Wage Price Index grew 1.3% as expected compared to the previous reading of 0.8%. The year-over-year data showed an increase of 4.0% more than the anticipated 3.9%.
- US Continuing Jobless Claims for the week ending on November 3 reached the highest level since 2022 at 1.865M from the previous reading of 1.833M.
- US Initial Jobless Claims for the week ending on November 10 rose to 231K against the 220K as expected, marking the highest level in nearly three months.
- The October’s US Consumer Price Index (CPI) showed lower readings than expected, with the annual rate slowing from 3.7% to 3.2%, falling below the consensus forecast of 3.3%. The monthly CPI reduced to 0.0% from 0.4%.
- The US Core CPI rose by 0.2% below the expectations of 0.3%, and the annual rate decreased to 4.0% from 4.1% prior.
Technical Analysis: Australian Dollar looks to revisit the previous week’s high near 0.6550 major level
The Australian Dollar trades higher around the 0.6520 level on Monday. The AUD/USD pair could find a barrier at the previous week’s high at 0.6541, aligning with the 0.6550 major level. On the downside, the psychological level at 0.6500 appears to be the immediate support, followed by the 23.6% Fibonacci retracement at 0.6478. If a break occurs below the level, the 14-day Exponential Moving Average (EMA) at 0.6448 could be the next support backed by a 38.2% Fibonacci retracement at 0.6438.
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 strongest against the US Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.11% | -0.22% | -0.12% | -0.40% | -0.58% | -0.37% | -0.17% | |
EUR | 0.11% | -0.08% | -0.01% | -0.28% | -0.49% | -0.25% | -0.06% | |
GBP | 0.18% | 0.11% | 0.07% | -0.18% | -0.38% | -0.17% | 0.03% | |
CAD | 0.13% | 0.02% | -0.09% | -0.25% | -0.46% | -0.24% | -0.03% | |
AUD | 0.36% | 0.26% | 0.15% | 0.25% | -0.21% | 0.01% | 0.21% | |
JPY | 0.60% | 0.48% | 0.15% | 0.46% | 0.20% | 0.25% | 0.42% | |
NZD | 0.36% | 0.23% | 0.18% | 0.24% | -0.03% | -0.22% | 0.21% | |
CHF | 0.16% | 0.05% | -0.03% | 0.04% | -0.24% | -0.43% | -0.21% |
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).
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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