Australian Dollar strengthens after Aussie data amid a stable US Dollar
- Australian Dollar gains ground after Australia’s consumer spending data on Thursday.
- Australian (MoM) grew by 1.1% in January, against the expected 1.5% and the previous decline of 2.7%.
- US Dollar Index (DXY) remains stable amid the higher US Treasury yields.
- US GDP Annualized (Q4) increased by 3.2%, slightly below market expectations of remaining steady at 3.3%.
The Australian Dollar (AUD) retraces its recent losses following the release of Australia’s Retail Sales and Private Capital Expenditure data on Thursday. However, recent Gross Domestic Product (GDP) data from the United States (US) has led financial markets to delay expectations for the Federal Reserve’s (Fed) first rate cut. This has provided some support for the US Dollar (USD), thereby weakening the AUD/USD pair.
Australian Dollar received upward support as the S&P/ASX 200 Index recovered daily losses. However, the Aussie equity market opened lower as gains in the property sector are being offset by losses in the tech sector on the final day of company reporting. Selling pressure was further intensified by Wednesday’s inflation data and weaker commodity prices. Additionally, Australian markets are taking cues from a weak performance on Wall Street overnight as traders exercise caution ahead of the release of key US Personal Consumption Expenditures – Price Index data, which could potentially influence the Federal Reserve’s monetary policy stance.
The US Dollar Index (DXY) maintains its stability amid higher US Treasury yields. Furthermore, US Federal Reserve speakers have maintained a cautious stance, suggesting potential rate cuts later in the year. This leads to a reduced likelihood of rate cuts in upcoming meetings, providing upward support for the Greenback.
Daily Digest Market Movers: Australian Dollar improves after Retail Sales data
- The seasonally adjusted Australian Retail Sales (MoM) grew by 1.1% in January, lower than expected 1.5% but swinging from the previous decline of 2.7%.
- Australian Private Capital Expenditure improved by 0.8% in the fourth quarter of 2023, from the expected 0.5% and 0.6% prior.
- Australian Monthly Consumer Price Index (CPI) was unchanged at 3.4% for January, which was below market expectations of 3.5%.
- Australian Construction Work Done increased by 0.7% in the fourth quarter of 2023, against the expected 0.8% and 1.3% prior.
- ANZ-Roy Morgan Australian Consumer Confidence is nearly unchanged at 83.2 for the current week. This marks the 56th consecutive week that the index has remained below the threshold of 85. The index sits just 0.4 points below the 2024 weekly average of 83.6.
- The Reserve Bank of New Zealand (RBNZ) decided to hold the Official Cash Rate (OCR) unchanged at 5.5%, as widely expected in its February monetary policy meeting.
- New York Federal Reserve (Fed) President John Williams stated on Wednesday that while there remains some ground to cover in reaching the Fed’s 2% inflation target, the possibility of interest rate cuts this year is on the table, contingent upon incoming data.
- Boston Federal Reserve (Fed) President Susan Collins maintains her expectation for the Fed to initiate easing later this year. However, she notes that progress on inflation has decelerated, and policymakers should await further evidence to ensure a clear path toward the 2% target.
- As per the CME FedWatch Tool, the odds for March rate cuts is 3.0%, with the likelihood of a cut down in May and June to 19.3% and 52.6%, respectively.
- According to reports, US House Speaker James Michael Johnson has informed the White House of his willingness to adjust the two funding deadlines to March 8 and March 22. Currently, funding is set to expire for four bills on March 1, and for eight bills on March 8.
- The preliminary US Gross Domestic Product Annualized grew by 3.2% in the fourth quarter of 2023, slightly below market expectations of remaining steady at 3.3%.
- The preliminary US Gross Domestic Product Price Index (Q4) increased by 1.7% against the expected and previous rise of 1.5%.
- US Housing Price Index (MoM) increased by 0.1% in December, falling short of the 0.3% expected and 0.4% prior.
- US Durable Goods Orders decreased by 6.1% against the market expectation of a 4.5% decrease and a previous decrease of 0.3%.
- US New Home Sales Change (MoM) grew by 1.5% in January, falling short of the previous growth of 7.2%.
- US New Home Sales (MoM) came in at 0.661M in January against the expected 0.680M and 0.664 prior.
Technical Analysis: Australian Dollar hovers around the psychological level of 0.6500
The Australian Dollar traded around the psychological level of 0.6500 on Thursday. A breach below this level could potentially prompt the AUD/USD pair to target the area around the major support level of 0.6450 and February’s low at 0.6442. Conversely, on the upside, the immediate resistance zone is observed around the 21-day Exponential Moving Average (EMA) at 0.6539, followed by the 23.6% Fibonacci retracement at 0.6543 and the major level of 0.6550. A breakout above this resistance zone may lead the AUD/USD pair to approach 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 Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | -0.04% | -0.03% | -0.25% | -0.53% | -0.12% | -0.04% | |
| EUR | -0.04% | -0.07% | -0.06% | -0.29% | -0.56% | -0.16% | -0.08% | |
| GBP | 0.04% | 0.07% | 0.01% | -0.22% | -0.48% | -0.10% | 0.00% | |
| CAD | 0.03% | 0.06% | -0.03% | -0.23% | -0.49% | -0.10% | -0.02% | |
| AUD | 0.27% | 0.30% | 0.22% | 0.24% | -0.27% | 0.15% | 0.22% | |
| JPY | 0.52% | 0.53% | 0.46% | 0.48% | 0.26% | 0.41% | 0.48% | |
| NZD | 0.11% | 0.17% | 0.10% | 0.12% | -0.12% | -0.39% | 0.11% | |
| CHF | 0.05% | 0.09% | 0.00% | 0.02% | -0.21% | -0.49% | -0.07% |
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.