Australian Dollar holds ground despite stagnated Retail Sales
- The Australian Dollar holds its position after Retail Sales reported no growth in July.
- Australia’s Retail Sales stagnated month-on-month in July, against the expected 0.3% increase.
- The US Dollar received support following stronger-than-expected US GDP data for Q2.
The Australian Dollar (AUD) remains steady against the stable US Dollar (USD) following the Retail Sales report on Friday, which showed no growth month-on-month in July, falling short of the anticipated 0.3% and the previous 0.5% increase. However, stronger-than-expected US Gross Domestic Product (GDP) data for the second quarter released on Thursday has put pressure on the AUD/USD pair.
The AUD/USD pair could see further gains as July’s higher-than-expected Monthly Consumer Price Index (CPI) has bolstered expectations that the Reserve Bank of Australia (RBA) may adopt a more hawkish policy stance. Recent RBA Minutes also showed that board members agreed that a rate cut would be unlikely soon.
The US Dollar found support from better-than-expected economic data, but dovish comments from Federal Reserve officials could limit its gains. On Thursday, Atlanta Fed President Raphael Bostic suggested it might be “time to move” on rate cuts as inflation continues to cool and the unemployment rate rises more than anticipated, per Reuters.
According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Fed at its September meeting. Investors will be paying close attention to Friday’s release of the US Personal Consumption Expenditure (PCE) Price Index for July, seeking clues about the future direction of US interest rates.
Daily Digest Market Movers: Australian Dollar inches higher following Retail Sales data
- The US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, exceeding both the expected and previous growth rate of 2.8%. Additionally, Initial Jobless Claims showed that the number of people filing for unemployment benefits fell to 231,000 for the week ending August 23, down from the previous 233,000 and slightly below the expected 232,000.
- US Core Personal Consumption Expenditures (QoQ), the Federal Reserve’s preferred measure of underlying inflation, increased by 2.8% in the second quarter, slightly below the market forecast of 2.9%. This marks a significant deceleration from the 3.7% growth observed in the first quarter.
- Australia’s Private Capital Expenditure unexpectedly declined by 2.2% in the second quarter, reversing from an upwardly revised 1.9% expansion in the previous period and falling short of market expectations for a 1.0% increase. This marks the first contraction in new capital expenditure since the third quarter of 2023.
- Australia’s Monthly Consumer Price Index (CPI) increased by 3.5% year-on-year in July, down from June’s 3.8% but slightly above the market consensus of 3.4%. Despite the slight decrease, this marks the lowest CPI figure since March.
- San Francisco Federal Reserve President Mary Daly stated on Monday in an interview with Bloomberg TV that “the time is upon us” to begin cutting interest rates, likely starting with a quarter-percentage point reduction. Daly suggested that if inflation continues to slow gradually and the labor market maintains a “steady, sustainable” pace of job growth, it would be reasonable to “adjust policy at the regular, normal cadence.”
- FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool.
- On Tuesday, the RBA Minutes suggested that the board members had considered a rate hike earlier this month before ultimately deciding that maintaining current rates would better balance the risks. Additionally, RBA members agreed that a rate cut is unlikely soon.
Technical Analysis: Australian Dollar holds position near 0.6800
The Australian Dollar trades around 0.6790 on Friday. Analyzing the daily chart, the AUD/USD pair appears to be testing the lower boundary of its ascending channel, indicating a potential reinforcement of the bullish bias. However, the 14-day Relative Strength Index (RSI) remains just below the 70 mark, which continues to support the ongoing bullish trend.
Regarding resistance, the AUD/USD pair is testing the immediate barrier at the lower boundary of the ascending channel, near the seven-month high of 0.6798. A break above this level could open the path for the pair to target the region around the upper boundary of the ascending channel, near the 0.6920 level.
On the downside, the AUD/USD pair may find support near the nine-day Exponential Moving Average (EMA) at the 0.6761 level. A drop below this EMA could weaken the bullish bias and exert downward pressure, potentially leading the pair to test the throwback level at 0.6575, followed by another throwback level at 0.6470.
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 | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.00% | 0.00% | -0.10% | -0.02% | 0.03% | -0.13% | -0.02% | |
| EUR | 0.00% | 0.00% | -0.10% | -0.02% | 0.04% | -0.14% | -0.02% | |
| GBP | -0.01% | -0.00% | -0.10% | -0.02% | 0.03% | -0.14% | -0.02% | |
| JPY | 0.10% | 0.10% | 0.10% | 0.11% | 0.16% | -0.03% | 0.11% | |
| CAD | 0.02% | 0.02% | 0.02% | -0.11% | 0.04% | -0.11% | -0.00% | |
| AUD | -0.03% | -0.04% | -0.03% | -0.16% | -0.04% | -0.18% | -0.05% | |
| NZD | 0.13% | 0.14% | 0.14% | 0.03% | 0.11% | 0.18% | 0.13% | |
| CHF | 0.02% | 0.02% | 0.02% | -0.11% | 0.00% | 0.05% | -0.13% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.