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- Australian Dollar continues its winning streak despite downbeat Aussie monthly CPI.
- Australia’s Monthly Consumer Price Index declined by 4.9% in October against the expected 5.2%.
- US Dollar Index loses ground despite the better-than-expected US economic data.
The Australian Dollar (AUD) is on a winning streak, extending its gains for the fifth consecutive day on Wednesday. This surge is attributed to a heightened risk appetite in the market and the upward movement in commodity prices. Additionally, the softer US Dollar (USD), influenced by a less hawkish stance from the US Federal Reserve (Fed), is providing support to the AUD/USD pair.
Australia’s Monthly Consumer Price Index (CPI) for October shows a reading of 4.9%, a decrease from the previous reading of 5.6% in September and slightly below the expected 5.2%. While the downbeat data have initially exerted some pressure, it seems that the Australian Dollar (AUD) has managed to recover from that pressure.
The US Dollar Index (DXY) has dipped to its lowest level since August 11 despite the better-than-expected Housing Price Index and Consumer Confidence data from the United States (US). The decline in US Treasury yields acted as an additional negative factor for the Greenback.
Fed Governor Christopher Waller’s comments, suggesting that if inflation consistently declines, there’s no need to insist on maintaining high interest rates, further fueled the negative momentum for the Greenback.
Investors are expected to shift their focus to the preliminary Gross Domestic Product Annualized (GDP) data for the third quarter in the US. This key economic indicator will provide insights into the pace and trajectory of economic growth during that period. Later in the day, the Federal Reserve will release the Beige Book, providing a comprehensive picture of the overall economic growth in the United States (US).
Daily Digest Market Movers: Australian Dollar extends its gains despite downbeat Aussie data, softer US Dollar
- Australia’s seasonally adjusted Retail Sales data showed monthly readings for October, which declined by 0.2% against the market expectations of a 0.1% rise and 0.9% prior.
- Reserve Bank of Australia (RBA) Governor Michele Bullock highlighted that the current monetary policy is on the restrictive side, with rate hikes putting a damper on demand, particularly in the context of persistent services inflation.
- Governor Bullock emphasized the need for caution in employing high interest rates to combat inflation without inadvertently raising the unemployment rate.
- The People’s Bank of China (PBoC) has issued a notice to strengthen financial support for private firms. This comprehensive support encompasses assistance for private enterprises in listing and financing, mergers and acquisitions, as well as restructuring.
- Federal Open Market Committee (FOMC) meeting minutes revealed that members decided unanimously to keep policy restrictive for some time until there is clear and sustainable evidence of inflation moving down toward the Committee’s target.
- US Housing Price Index (MoM) remained consistent at 0.6% in September against the expected figure of 0.4%.
- The CB Consumer Confidence Index experienced an increase in November, rising to 102.0. This uptick comes after a downward revision of October figures, which were adjusted from 102.6 to 99.1.
Technical Analysis: Australian Dollar maintains its position above 0.6650 major level
The Australian Dollar trades higher around the 0.6670 level on Wednesday. The next significant resistance lies at the psychological level of 0.6700. A breakthrough above this level could potentially support the AUD/USD pair, allowing it to test the region around August’s high at 0.6723. On the downside, the key support is positioned at 0.6650, followed by the seven-day Exponential Moving Average (EMA) at 0.6601. A decisive break below the EMA could potentially push the pair to reach the support near the 23.6% Fibonacci retracement level at 0.6569.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.05% | 0.00% | -0.13% | 0.12% | 0.16% | -0.69% | -0.01% | |
| EUR | -0.04% | -0.03% | -0.17% | 0.08% | 0.12% | -0.75% | -0.06% | |
| GBP | 0.00% | 0.03% | -0.13% | 0.11% | 0.15% | -0.71% | -0.01% | |
| CAD | 0.13% | 0.18% | 0.14% | 0.26% | 0.29% | -0.56% | 0.11% | |
| AUD | -0.12% | -0.09% | -0.12% | -0.28% | 0.03% | -0.82% | -0.13% | |
| JPY | -0.17% | -0.11% | -0.16% | -0.30% | -0.04% | -0.84% | -0.17% | |
| NZD | 0.71% | 0.72% | 0.69% | 0.55% | 0.81% | 0.84% | 0.67% | |
| CHF | 0.00% | 0.04% | 0.01% | -0.13% | 0.13% | 0.16% | -0.69% |
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.
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