Australian Dollar reaches near a major level on China stimulus optimism
- Australian Dollar recovers the recent losses as the Greenback struggles to hold ground.
- Australia’s Private Capital Expenditure declined by 0.6% in Q3, against the expected rise of 1.0%.
- China’s Manufacturing and Non-Manufacturing PMI both fell to 49.4 and 50.02, respectively.
- US GDP Annualized data increased by 5.2% as compared to the 4.9% prior.
The Australian Dollar (AUD) recovers the recent losses, despite downbeat economic data from Australia on Thursday. The AUD/USD pair retraced from its nearly four-month high at 0.6676 in the previous session. The downward pressure on the Aussie pair can be attributed to the recovery of the US Dollar (USD).
Australia’s Private Capital Expenditure experienced a decline of 0.6% in Q3, contrasting with the previous growth of 2.8%. This contraction fell short of the expected rise of 1.0%. The data, released by the Australian Bureau of Statistics, indicates a decrease in both current and future capital expenditure intentions within the private sector of the country. This could ease the inflationary pressure, which reduces the likelihood of an interest rate hike by the Reserve Bank of Australia (RBA).
China’s NBS Manufacturing PMI for November decreased to 49.4 from the previous reading of 49.5. The market expectation was for an increase to 49.7. Additionally, the Non-Manufacturing PMI contracted to 50.02, falling short of the expected 51.1 and the previous reading of 50.6. The downbeat PMI data could spark discussions about the need for more stimulus, which is benefiting the Australian Dollar.
The US Dollar Index (DXY) managed to halt its four-day losing streak on Wednesday. This stabilization was supported by stronger-than-expected US Gross Domestic Product Annualized data released by the US Bureau of Economic Analysis. The US GDP data indicated an increase in the value of the final goods and services produced in the United States during the third quarter. However, the DXY struggles to maintain its position on Thursday.
United States is set to release crucial economic data later in the North American session. Among the notable reports are the weekly Jobless Claims for the week ending on November 24, with an expected increase to 220K from the previous 209K. Additionally, the Core Personal Consumption Expenditure (PCE) Price Index for October will be released, with expectations of a slowdown in consumer inflation. The anticipated annual rate is expected to decrease from 3.7% to 3.5%.
Daily Digest Market Movers: Australian Dollar receives upward support amid hawkish RBA
- 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%.
- 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.
- US Federal Reserve Governor Christopher Waller suggested that if inflation consistently declines, there’s no need to maintain high-interest rates.
- US Gross Domestic Product Annualized increased by 5.2% during the third quarter from the previous reading of 4.9%, above the market consensus of 5.0.
- 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 hovers below the barrier at 0.6650 major level
The Australian Dollar trades at higher levels around 0.6630 on Thursday. The major level at 0.6650 could be the immediate resistance, followed by a significant barrier at the psychological level of 0.6700. A successful breakthrough above this level may provide support for the AUD/USD pair, opening the possibility of testing the resistance around August’s high at 0.6723. Conversely, key support is positioned around the seven-day Exponential Moving Average (EMA) at 0.6597. A decisive break below the EMA could potentially lead the pair to reach support near the 23.6% Fibonacci retracement level at 0.6576, followed by the major level at 0.6550.
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 Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | -0.01% | -0.09% | -0.36% | 0.03% | -0.23% | 0.00% | |
| EUR | -0.03% | -0.06% | -0.12% | -0.39% | 0.00% | -0.26% | -0.06% | |
| GBP | 0.01% | 0.05% | -0.07% | -0.34% | 0.05% | -0.21% | 0.02% | |
| CAD | 0.09% | 0.12% | 0.07% | -0.27% | 0.12% | -0.15% | 0.08% | |
| AUD | 0.33% | 0.40% | 0.33% | 0.27% | 0.39% | 0.13% | 0.35% | |
| JPY | -0.04% | 0.01% | -0.06% | -0.11% | -0.40% | -0.25% | -0.02% | |
| NZD | 0.22% | 0.27% | 0.22% | 0.13% | -0.12% | 0.25% | 0.23% | |
| CHF | 0.02% | 0.05% | -0.01% | -0.09% | -0.37% | 0.03% | -0.22% |
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.