- 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 .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | -0.04% | 0.10% | 0.09% | 0.12% | 0.06% | 0.03% | |
| EUR | -0.06% | -0.10% | 0.04% | 0.03% | 0.06% | 0.00% | -0.03% | |
| GBP | 0.04% | 0.10% | 0.13% | 0.13% | 0.16% | 0.11% | 0.07% | |
| CAD | -0.10% | -0.03% | -0.13% | 0.00% | 0.03% | -0.02% | -0.06% | |
| AUD | -0.09% | -0.03% | -0.13% | 0.00% | 0.03% | -0.02% | -0.06% | |
| JPY | -0.12% | -0.06% | -0.15% | -0.04% | -0.03% | -0.04% | -0.08% | |
| NZD | -0.07% | -0.01% | -0.11% | 0.02% | 0.03% | 0.04% | -0.04% | |
| CHF | -0.04% | 0.02% | -0.08% | 0.05% | 0.05% | 0.08% | 0.03% |
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.
Source: https://www.fxstreet.com/news/australian-dollar-moves-around-a-major-level-with-a-negative-bias-202311130126