Australian Dollar maintains calm amid upbeat Chinese data, weaker ASX 200 Index
- Australian Dollar could face challenges as the RBA is expected to maintain its current rates.
- Australia’s S&P/ASX 200 Index tracks softer commodity prices.
- Chinese Retail Sales (YoY) increased by 5.5% in February, against the expected 5.2% and 7.4% prior.
- US Dollar retraces gains on weaker US Treasury yields.
The Australian Dollar (AUD) attempts to snap its losing streak on Monday. The AUD/USD pair receives upward support as the US Dollar (USD) retraces its gains on lower US Treasury yields. However, market participants adopt caution ahead of the Reserve Bank of Australia’s (RBA) policy decision scheduled for Tuesday. Additionally, investors are awaiting interest rate decisions from both the People’s Bank of China (PBoC) and the US Federal Reserve (Fed), expected to be released on Wednesday.
Australian Dollar could have faced pressure as the S&P/ASX 200 Index extends its decline for the third consecutive session. Mining and energy stocks are leading the downturn, reflecting softer commodity prices. Meanwhile, severe Tropical Cyclone Megan is expected to bring destructive winds and heavy rainfall to Australia’s far north. Evacuations are underway, and a major manganese mine has been closed in anticipation of the cyclone’s arrival.
The US Dollar Index (DXY) loses ground amidst the market confusion surrounding the Federal Reserve, which is expected to maintain its higher interest rates in response to recent inflation pressure. Traders will likely observe the housing data from the United States (US) on Tuesday.
Daily Digest Market Movers: Australian Dollar appreciates amid a market risk aversion
- According to Bloomberg, Westpac anticipates the Reserve Bank of Australia could maintain its cash rate at 4.35% at Tuesday’s meeting.
- RBA Governor Michele Bullock recently stated that inflation in Australia is primarily “homegrown” and “demand-driven,” attributable to the strength of the labor market and increasing wage inflation. The RBA does not anticipate this phenomenon occurring until 2026.
- China’s Retail Sales (YoY) increased by 5.5% in February, against the expected 5.2% and 7.4% prior.
- Chinese Industrial Production (YoY) rose by 7.0%, compared to the market expectation of a 5.0% figure in February and 6.8% previous reading.
- According to the CME FedWatch Tool, the probability of a rate cut in March currently stands at 1.0%, while it has decreased to 6.1% for May. The likelihood of a rate cut in June and July is lower, at 56.3% and 75.2%, respectively.
- The preliminary US Michigan Consumer Sentiment Index for March decreased to 76.5, from the previous reading of 76.9. This decline comes in contrast to expectations of it remaining unchanged.
- The Board of Governors of the Federal Reserve released Industrial Production (MoM), which increased by 0.1% in February, against the expected reading of flat 0.0% and from the previous decline of 0.5%.
- The US Core Producer Price Index (PPI) remained consistent with the rise of 2.0% year-over-year in February, maintaining its position above the 1.9% expected. The monthly report showed an increase of 0.3% against 0.5% prior, exceeding the expected 0.2% reading.
- US PPI (YoY) increased by 1.6% in February, surpassing the expected 1.1% and 1.0% prior. PPI (MoM) rose by 0.6% above the market expectation and the previous increase of 0.3%.
- US Retail Sales rose by 0.6% monthly, below the expected 0.8% in February, swinging from the previous decline of 1.1%. While Retail Sales Control Group improved to a flat 0.0%, compared to the previous decline of 0.3%.
Technical Analysis: Australian Dollar hovers above the major support at 0.6550
The Australian Dollar is trading near 0.6560 on Monday. The AUD/USD pair could find immediate support around the 50.0% retracement level of 0.6555, coinciding with a significant support level of 0.6550. A breach below this level could potentially exert downward pressure on the pair, with further support expected around the 61.8% Fibonacci retracement level of 0.6528, followed by the psychological level of 0.6500. On the upside, the AUD/USD pair may face resistance near the nine-day Exponential Moving Average (EMA) at 0.6576, followed by the psychological barrier at 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 .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.06% | -0.03% | -0.07% | -0.11% | 0.10% | -0.09% | -0.04% | |
| EUR | 0.06% | 0.03% | -0.01% | -0.07% | 0.16% | -0.03% | 0.00% | |
| GBP | 0.03% | -0.03% | -0.03% | -0.10% | 0.11% | -0.06% | -0.02% | |
| CAD | 0.07% | 0.00% | 0.03% | -0.07% | 0.15% | -0.03% | 0.01% | |
| AUD | 0.11% | 0.05% | 0.10% | 0.07% | 0.22% | 0.04% | 0.08% | |
| JPY | -0.08% | -0.15% | -0.05% | -0.15% | -0.19% | -0.17% | -0.14% | |
| NZD | 0.07% | 0.04% | 0.06% | 0.03% | -0.04% | 0.17% | 0.04% | |
| CHF | 0.06% | 0.00% | 0.03% | -0.01% | -0.08% | 0.15% | -0.04% |
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.