Australian Dollar stays calm due to thin trading on Easter Monday
- Australian Dollar gains ground on encouraging Chinese PMI data.
- RBA Meeting Minutes will be awaited to be released on Tuesday.
- Chinese Manufacturing PMI came in at 51.1, against the expected 51.0 and 50.9 prior.
- US Dollar faces challenges after dovish remarks from Fed Chair Powell.
The Australian Dollar (AUD) retraces its recent losses on Monday, possibly bolstered by positive Chinese Purchasing Managers Index (PMI) figures. Moreover, the US Dollar (USD) faced downward pressure due to decreased US Treasury yields, lending support to the AUD/USD pair. Trading activity is anticipated to be subdued due to Easter Monday.
The Australian Dollar encountered challenges amidst weaker Consumer Inflation Expectations, possibly signaling expectations for interest rate cuts by the Reserve Bank of Australia (RBA) in late 2024. Investors are likely to closely monitor the release of the RBA Meeting Minutes scheduled for Tuesday.
The US Dollar Index (DXY) struggled on dovish remarks from the Federal Reserve (Fed) Chairman Jerome Powell on Friday. He stated that the recent US inflation data aligned with the desired trajectory, affirming the Federal Reserve’s stance on interest rate cuts for the year. Personal Consumption Expenditures Price Index (PCE) data from the United States (US) met expectations in February.
Daily Digest Market Movers: Australian Dollar increases on positive Chinese PMI figures
- Australia’s Consumer Inflation Expectations came in at 4.3% in March, a slight decrease from the previous increase of 4.5%.
- On Sunday, China’s National Bureau of Statistics (NBS) announced that the monthly NBS Manufacturing PMI rose to 50.8 in March from 49.1 in the prior month. Additionally, the NBS Non-Manufacturing PMI increased to 53.0 in March from 51.4 in February.
- On Thursday, San Francisco Federal Reserve (Fed) President Mary C. Daly emphasized that although the Fed stands prepared to decrease rates when data supports such action, there’s no need for haste as the US economy remains robust with minimal risk of weakening.
- Federal Reserve Board Governor Christopher Waller still sees ‘no rush’ to cut rates amid sticky inflation data.
- US Core PCE came at 0.3% (MoM) in February against January’s 0.5%, aligned with the market consensus. The annual index rose by 2.8% as expected, compared to the previous increase of 2.9%.
- US Headline PCE (MoM) increased by 0.3%, slightly lower than expected and a previous rise of 0.4%. The year-over-year PCE increased by 2.5%, as expected.
- US Gross Domestic Product Annualized expanded by 3.4% in the fourth quarter of 2023. The market expectation was to be unchanged at a 3.2% increase.
- The US Gross Domestic Product Price Index remained consistent at a 1.7% increase, as expected in Q4.
- Core Personal Consumption Expenditures (QoQ) came in at 2.0% in the fourth quarter, slightly below the expected and previous reading of 2.1%.
- US Initial Jobless Claims fell to 210K in the week ending on March 22, against the expected increase to 215K from 212K prior.
Technical Analysis: Australian Dollar rises to near 0.6530; next barrier at 21-day EMA
The Australian Dollar hovers near 0.6530 on Monday. Immediate resistance is observed near the 21-day Exponential Moving Average (EMA) at 0.6546, coinciding with a major barrier at 0.6550. A breach above this level could lead the AUD/USD pair to surpass the 38.2% Fibonacci retracement level of 0.6554, potentially leading towards the psychological level of 0.6600. On the downside, notable support lies at the psychological threshold of 0.6500, followed by March’s low at 0.6477.
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 Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | 0.06% | 0.05% | 0.12% | -0.08% | 0.04% | 0.02% | |
| EUR | -0.05% | 0.01% | 0.01% | 0.07% | -0.13% | -0.02% | -0.03% | |
| GBP | -0.06% | 0.00% | 0.00% | 0.07% | -0.14% | -0.03% | -0.04% | |
| CAD | -0.05% | 0.00% | 0.01% | 0.07% | -0.14% | -0.02% | -0.04% | |
| AUD | -0.11% | -0.06% | -0.06% | -0.07% | -0.19% | -0.08% | -0.09% | |
| JPY | 0.07% | 0.16% | 0.14% | 0.14% | 0.23% | 0.13% | 0.10% | |
| NZD | -0.04% | 0.02% | 0.02% | 0.04% | 0.08% | -0.12% | -0.02% | |
| CHF | -0.02% | 0.03% | 0.04% | 0.04% | 0.10% | -0.10% | 0.03% |
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 has always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has 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.