Australian Dollar maintains its position post intraday gains amid lowered US Dollar
- Australian Dollar regains ground amid mixed US economic data.
- Australia’s data showed a slowdown in economic activities during November.
- RBA Governor Bullock mentioned that policy tightening is the appropriate response to demand-driven inflation.
- NAB expects another RBA rate hike at the February 2024 meeting.
- US Dollar extended the correction ahead of the Thanksgiving Day holiday.
The Australian Dollar (AUD) attempts to snap the recent losses on Thursday as the US Dollar (USD) retreats after hitting gains for two successive days. However, the AUD/USD pair faced downward pressure, likely due to increased demand for the Greenback in the previous session following the release of economic reports from the United States (US). Market activity is subdued as traders prepare for the Thanksgiving Day holiday in the US on Thursday, with shortened trading sessions expected on Friday.
Australia’s economic activity shows signs of a slowdown in November, according to Thursday’s data. The preliminary Judo Bank Manufacturing PMI for the month is reported at 47.7, down from the previous month’s 48.2. Judo Bank Services PMI also declined to 46.3 from the prior 47.9, and the Composite PMI decreased to 46.4 from the previous reading of 47.6.
Reserve Bank of Australia (RBA) Governor Michele Bullock addressed the recent monetary policy decision at the ABE Annual Dinner in Sydney on Wednesday. She noted that the inflation challenge is increasingly driven by domestic factors, particularly demand. Bullock emphasized that monetary policy tightening is the appropriate response to demand-driven inflation. While supply-chain inflation is easing, Australian inflation remains broad-based, with the trimmed mean still too high.
Governor Bullock also mentioned that prices are rising strongly for most goods and services, and service costs are increasing due to high demand. RBA’s liaison with firms indicates persistent domestic cost pressures, with high capacity utilization and a tight labor market. Bullock highlighted the need to cool demand while ensuring employment growth. Furthermore, the National Australia Bank (NAB) anticipates another RBA rate hike, expecting it to occur at the February 2024 meeting.
The US Dollar Index (DXY) experienced a rebound after the release of mixed US economic reports, continuing its correction but losing momentum amid higher equity prices. US Jobless Claims data on Wednesday showed a greater-than-expected decline in the week ending on November 17, with Initial Claims falling to 209K from 233K. Durable Goods Orders fell 5.4% in October, exceeding the expected 3.1% decline. However, the University of Michigan Consumer Sentiment Index for November stood at 61.3, compared to the expected reading of 60.5.
Daily Digest Market Movers: Australian Dollar attempts to regain ground as US Dollar weakens
- Australia’s Westpac Leading Index (MoM) for October contracted by 0.03% against the previous 0.07% rise.
- RBA’s meeting minutes revealed that the board acknowledged a “credible case” against an immediate rate hike but considered the case for tightening stronger due to increased inflation risks. The decision on further tightening would hinge on data and risk assessment.
- RBA’s minutes also stressed the importance of preventing even a modest rise in inflation expectations. Board forecasts assumed one or two more rate rises, and rising house prices suggested policy might not be overly restrictive.
- Chinese authorities are expected to take measures to support the real estate sector by drafting a list of 50 eligible developers, both private and state-owned. This list is expected to guide financial institutions in providing support through various means such as bank loans, debt, and equity financing.
- The Federal Open Market Committee (FOMC) meeting minutes reveal that members would entertain the idea of tightening monetary policy further if incoming information suggests insufficient progress toward the Committee’s inflation objective.
- FOMC members unanimously agree that policy should stay restrictive for some time until there is clear and sustainable evidence of inflation moving down toward the Committee’s target.
- US Existing Home Sales Change (MoM) for October declined by 4.1% as compared to the previous fall of 2.2%.
Technical Analysis: Australian Dollar remains below 0.6550, support at the 23.6% Fibonacci retracement
The Australian Dollar hovers around the 0.6540 level on Thursday. The 23.6% Fibonacci retracement at 0.6513 could serve as a key support. A potential break below this level might find support from the nine-day Exponential Moving Average (EMA) at 0.6510, coupled with the major level at 0.6500. On the upside, breaching the barrier at the 0.6550 major level could pave the way for a revisit to the three-month high at 0.6589, situated around the psychological level of 0.6600.
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.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.12% | -0.09% | -0.06% | -0.13% | -0.19% | -0.46% | -0.14% | |
| EUR | 0.12% | 0.03% | 0.05% | -0.02% | -0.07% | -0.33% | 0.00% | |
| GBP | 0.08% | -0.03% | 0.02% | -0.05% | -0.09% | -0.37% | -0.05% | |
| CAD | 0.07% | -0.05% | -0.02% | -0.07% | -0.12% | -0.38% | -0.05% | |
| AUD | 0.17% | 0.02% | 0.06% | 0.08% | -0.05% | -0.31% | 0.02% | |
| JPY | 0.19% | 0.06% | 0.11% | 0.14% | 0.04% | -0.26% | 0.06% | |
| NZD | 0.45% | 0.34% | 0.37% | 0.36% | 0.32% | 0.27% | 0.32% | |
| CHF | 0.12% | 0.00% | 0.03% | 0.06% | -0.02% | -0.07% | -0.33% |
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.