- Australian Dollar moves upward on a hawkish sentiment from the RBA Governor Michele Bullock.
- Australia’s chief policymaker Bullock indicated the RBA’s focus on supporting a robust labor market in Australia.
- China has lifted restrictions on three meat suppliers from Australia.
- FOMC commences its two-day policy meeting with the expectation of no change in interest rates.
The Australian Dollar (AUD) continues to gain ground following a volatile previous session. The ANZ-Roy Morgan Australian Consumer Confidence weekly survey rose to 80.8 from the previous week’s 76.4, coinciding with the Reserve Bank of Australia (RBA) leaving interest rates unchanged at last week’s final meeting for the year. Additionally, Westpac Consumer Confidence for December showed improvement at 2.7% from the previous decline of 2.6%.
Australia’s chief policymaker, Michele Bullock, the Governor of the RBA, expressed confidence, stating, “Don’t think we are falling behind in the inflation fight.” Bullock emphasized a cautious approach, closely monitoring data, and highlighted the RBA’s commitment to preserving employment gains. The central bank aims to prevent inflation expectations from getting “out of control.”
China has lifted its restrictions on imports of meat from Australia, removing suspensions on three meat suppliers. This positive development has the potential to boost sentiment and serve as a tailwind for the Australian Dollar. However, concerns about deflation in China prompted a selling trend for the AUD.
The US Dollar Index maintains its strength, supported by firmer US Treasury yields. The robust employment figures in the United States (US) boosted the Greenback, exerting downward pressure on the AUD/USD pair. A stronger US Dollar (USD) tends to dampen investor appetites and acts as a headwind for the pair.
The Federal Open Market Committee (FOMC) commences its two-day monetary policy meeting on Tuesday, and the prevailing expectation is that there will be no change in interest rates during this session. Market participants will closely watch the statement for signals about potential rate adjustments next year. Tuesday will also focus on the US Consumer Price Index (CPI) report for November, providing insights into potential monetary policy paths.
Daily Digest Market Movers: Australian Dollar moves upward amid weaker business conditions
- National Australia Bank’s Business Conditions for November, reflecting trading, profitability, and employment conditions in Australia, decreased to 9 from the previous reading of 13.
- National Australia Bank Business Confidence, which surveys the current business conditions in Australia and provides insights into the short-term performance of the overall economy, declined to 9 from the previous decrease of 2.
- China’s Consumer Price Index (CPI) experienced a year-on-year decline of 0.5% in November, compared to a 0.2% decrease in October. Monthly Chinese inflation fell by 0.5%, surpassing the 0.1% decline observed in October.
- China’s Producer Price Index (PPI) recorded a 3.0% year-on-year drop in November, reflecting a more substantial decline than the 2.6% decrease reported in October.
- US Nonfarm Payrolls for November rose by 199,000 against the previous rise of 150,000 in October and the market expectation of 180,000.
- US Average Hourly Earnings (Year-on-Year) held steady at 4.0%, aligning with market projections for November. Meanwhile, the Unemployment Rate dropped to 3.7% from the previous 3.9%.
- The preliminary Michigan Consumer Sentiment Index for December reached 69.4, a notable increase from the previous reading of 61.3.
Technical Analysis: Australian Dollar stays above the major level at 0.6550
The Australian Dollar trades around 0.6590 on Tuesday. The 21-day Exponential Moving Average (EMA) at 0.6555 may serve as a crucial support level, aligning with the significant level at 0.6550. If this support region is breached, it could exert downward pressure on the AUD/USD pair, potentially leading it toward the 38.2% Fibonacci retracement level at 0.6526. On the upside, the psychological level at 0.6600 is likely to act as a potential resistance barrier.
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 | -0.03% | -0.17% | -0.18% | -0.36% | -0.33% | -0.38% | -0.13% | |
| EUR | 0.03% | -0.14% | -0.13% | -0.34% | -0.32% | -0.36% | -0.11% | |
| GBP | 0.17% | 0.15% | 0.01% | -0.19% | -0.15% | -0.19% | 0.04% | |
| CAD | 0.16% | 0.15% | -0.01% | -0.18% | -0.17% | -0.23% | 0.02% | |
| AUD | 0.37% | 0.34% | 0.19% | 0.21% | 0.02% | -0.02% | 0.22% | |
| JPY | 0.32% | 0.29% | 0.15% | 0.17% | -0.02% | -0.07% | 0.19% | |
| NZD | 0.37% | 0.38% | 0.24% | 0.22% | 0.02% | 0.04% | 0.28% | |
| CHF | 0.14% | 0.12% | -0.03% | -0.02% | -0.20% | -0.20% | -0.24% |
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.
Source: https://www.fxstreet.com/news/australian-dollar-gains-ground-after-a-slightly-hawkish-speech-from-rba-governor-bullock-202312120132