- Australian Dollar moves on a downward trajectory as US Dollar strengthens.
- Australian Consumer Confidence declined by 1.3% in January against the 2.7% prior.
- Fed’s Bostic warned that inflation may waver in the upcoming months.
- Upbeat US bond yields contributed to supporting the Greenback.
- The risk aversion sentiment due to the Middle East conflict improves the US Dollar demand.
The Australian Dollar (AUD) continues its losing streak on Tuesday, which began on January 11. The AUD/USD pair faces downward pressure after the Westpac Consumer Confidence data for January showed a contraction. This development might contribute to the sentiment that there will be no further policy tightening from the Reserve Bank of Australia (RBA) in its upcoming board meeting in February.
Australia’s Consumer Confidence, released by the Faculty of Economics and Commerce at the Melbourne Institute, declined by 1.3% compared to the previous increase of 2.7%. However, on Monday, the TD Securities Inflation data showed a rise in December, which might have limited the losses of the Aussie Dollar.
The US Dollar Index (DXY) began the Tuesday session with a gap-up, supported by upbeat US Treasury yields. Investors’ confidence in the US Dollar (USD) appears to be returning following hawkish remarks by Atlanta Federal Reserve (Fed) President Raphael Bostic over the weekend.
According to the Financial Times, President Bostic suggested that inflation could “see-saw” if policymakers cut interest rates too soon. He warned that the descent of inflation toward the central bank’s 2.0% goal was likely to slow in the months ahead.
The US Dollar gains ground on risk aversion due to the geopolitical conflict between Israel and Gaza, which has escalated to the trade disruptions in the Red Sea. Iran-backed Houthi group persistently targeted maritime vessels despite recent military strikes by the United States (US) and the United Kingdom (UK) on Houthi sites in Yemen.
Traders will closely monitor the US NY Empire State Manufacturing Index for January, as well as a speech by the Federal Reserve’s Waller later on Tuesday. Additionally, Chinese Gross Domestic Product (GDP) and Retail Sales data are scheduled for Wednesday.
Daily Digest Market Movers: Australian Dollar loses ground as the US Dollar improves
- Australian TD Securities inflation increased by 5.2% YoY in December from 4.4% in November.
- Australia’s job advertisements improved by 0.1% in December, swinging from the previous decline of 4.6%.
- People’s Bank of China (PBoC) maintained the rate on its medium-term facility steady at 2.5%, increasing the expectation that the Reserve Requirement Ratio will be reduced the following month.
- Chinese Consumer Price Index (YoY) decreased by 0.3% in December, against the expected 0.4% decline. The monthly Consumer Price Index eased to 0.1%, compared to the market expectation of 0.2%. The yearly Producer Price Index fell by 2.7%, slightly exceeding the expected decline of 2.6%.
- Barclays revised its forecast for the first Federal Reserve (Fed) rate cut on Friday, moving it up to March from June. In a note released on Friday, Barclays analysts expressed their expectation for the Federal Open Market Committee (FOMC) to reduce the Fed Funds rate by 25 basis points at the March meeting.
- US Bureau of Labor Statistics reported that the December Producer Price Index (PPI) figure was 1.0% year-on-year, compared to the previous reading of 0.8%. The Core PPI YoY arrived at 1.8%, down from 2.0% in November. Monthly, the headline and Core PPI indices remained flat at -0.1% and 0.0%, respectively.
- US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) surged to 3.4% YoY in December, exceeding both November’s 3.1% and the anticipated market figure of 3.2%. The monthly CPI growth for December showed a 0.3% increase, surpassing the market analysts’ estimated projection of 0.2%. The annual Core CPI stood at 3.9%, a slight decrease from November’s 4.0%, while the monthly figure remained steady at 0.3%, in line with expectations.
Technical Analysis: Australian Dollar moves below the major level at 0.6650
The Australian Dollar trades near 0.6620 on Tuesday, positioned above psychological support at 0.6600 following the 50% retracement level at 0.6566 and major support at 0.6550. On the upside, the major barrier appears at the 0.6650 level following the 14-day Exponential Moving Average (EMA) at 0.6699 aligned with the psychological level at 0.6700.
AUD/USD: Daily Chart
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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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.28% | 0.26% | 0.26% | 0.54% | 0.23% | 0.41% | 0.26% | |
| EUR | -0.26% | 0.01% | -0.01% | 0.28% | -0.03% | 0.15% | 0.00% | |
| GBP | -0.27% | 0.00% | -0.02% | 0.26% | -0.06% | 0.11% | -0.01% | |
| CAD | -0.26% | 0.01% | 0.01% | 0.28% | -0.03% | 0.15% | 0.00% | |
| AUD | -0.55% | -0.25% | -0.25% | -0.28% | -0.30% | -0.13% | -0.26% | |
| JPY | -0.23% | 0.05% | 0.04% | 0.03% | 0.29% | 0.17% | 0.04% | |
| NZD | -0.41% | -0.11% | -0.11% | -0.14% | 0.14% | -0.17% | -0.14% | |
| CHF | -0.27% | 0.01% | 0.02% | 0.00% | 0.28% | -0.04% | 0.13% |
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-extends-losses-on-softer-consumer-confidence-upbeat-us-dollar-202401160141