- Australian Dollar attempts to halt its losing streak as the US Dollar improves on risk aversion.
- Australian Consumer Inflation Expectations and Unemployment Rate remained consistent at 4.5% and 3.9%, respectively.
- The solid US Retail Sales data reinforced the strength of the Greenback.
- Traders’ expectations have been trimmed for the Fed’s first rate cut in March.
The Australian Dollar (AUD) grapples to retrace its losses on Thursday that began on January 11. The robust economic data emanating on Wednesday from the United States (US) played a role in diminishing the strength of the AUD/USD pair. Furthermore, as the US military executed another series of strikes on Houthi targets in Yemen, the heightened geopolitical tensions further bolstered the inclination towards risk aversion. This, in turn, supports the demand for the US Dollar (USD) over its counterparts, including the Australian Dollar (AUD).
Australia’s moderate data released on Thursday seem to fail to provide any support for the Australian Dollar. Consumer Inflation Expectations remained steady at 4.5% in January, while the seasonally adjusted Unemployment Rate held firm at 3.9% in line with expectations for December. However, the Employment Change data revealed a decline, with the number of employed individuals decreasing by 65.1K, contrary to the anticipated increase of 17.6K.
The US Dollar Index (DXY) retreated from a five-week high at 103.69 on downbeat US Treasury yields after US economic data on Wednesday. US Retail Sales (MoM) rose by 0.6% in December, exceeding the market consensus of 0.4 and 0.3% prior.
US Retail Sales Control Group improved to 0.8% from the previous reading of 0.5%. Moreover, Retail Sales ex Autos (MoM), excluding the key sector of motor vehicles and parts, grew by 0.4% as compared to the market anticipation of remaining consistent at 0.2%. Traders will likely watch the US housing data on Thursday.
The US Dollar cheers the investors’ sentiment as they have scaled back their expectations for the Federal Reserve’s (Fed) first rate cut in March. The probability of a rate cut has decreased to 57%, a significant drop from over 70%.
Daily Digest Market Movers: Australian Dollar continues to lose ground on risk aversion
- Australia’s Consumer Confidence declined by 1.3% in January as compared to the previous increase of 2.7%.
- 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%.
- China’s annual Gross Domestic Product (GDP) grew by 5.2% against the 5.3% expected in the fourth quarter.
- Chinese December’s Industrial Production (YoY) increased by 6.8%. which was expected to remain consistent at 6.6%.
- China’s Retail Sales year-over-year came at 7.4%, falling short of the market consensus of 8.0%.
- China’s Premier Li Qiang stated on Tuesday that China’s economy grew by approximately 5.2% in 2023.
- Federal Reserve Governor Christopher Waller cautioned that, despite positive developments in the inflation outlook, the central bank is not rushing to outline plans for rate cuts.
- Atlanta Fed President Raphael Bostic also suggested over the weekend that premature interest rate cuts could lead to inflation fluctuations. Bostic emphasized that the deceleration of inflation towards the central bank’s 2.0% target was expected to slow down in the coming months.
- US NY Empire State Manufacturing Index saw a significant decline, dropping to -43.7 in January, well below the expected improvement to -5.
Technical Analysis: Australian Dollar hovers around the major level at 0.6550
The Australian Dollar trades near 0.6560 on Thursday followed by the immediate support level at 0.6550. A break below the latter could influence the AUD/USD pair to navigate the region around the psychological level at 0.6500 followed by the 61.8% Fibonacci retracement level at 0.6495. On the upside, the psychological resistance could be at 0.6600 level. A break above the barrier could push the AUD/USD pair to approach the major level at 0.6650 followed by the 14-day Exponential Moving Average (EMA) at 0.6659. If the pair surpasses the 14-day EMA, it could attempt to test 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 strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.08% | -0.04% | -0.07% | -0.14% | -0.10% | -0.11% | 0.00% | |
| EUR | 0.08% | 0.04% | 0.02% | -0.05% | -0.01% | -0.03% | 0.08% | |
| GBP | 0.04% | -0.04% | -0.03% | -0.08% | -0.06% | -0.06% | 0.04% | |
| CAD | 0.07% | -0.01% | 0.03% | -0.06% | -0.04% | -0.04% | 0.07% | |
| AUD | 0.14% | 0.05% | 0.09% | 0.06% | 0.04% | 0.02% | 0.14% | |
| JPY | 0.11% | 0.03% | 0.05% | 0.03% | -0.04% | -0.01% | 0.10% | |
| NZD | 0.13% | 0.03% | 0.07% | 0.04% | -0.02% | 0.01% | 0.13% | |
| CHF | 0.00% | -0.06% | -0.04% | -0.07% | -0.13% | -0.10% | -0.11% |
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-hovers-around-a-major-level-after-moderate-aussie-data-202401180145