- Australian Dollar gains ground after China’s interest rate decision.
- Australia’s Dollar faced pressure on recovery in the Greenback.
- PBoC remained LPR consistent 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) seems to recover the recent losses on the back of a recovery in US Treasury yields. The yield on the 10-year Treasury note stands at 4.45% 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.
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).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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