Australian Dollar trims intraday gains amid weaker China Industrial Profit YTD
- Australian Dollar could gain ground on the positive sentiment.
- Australia’s Dollar tests three-month highs toward the 0.6600 level.
- RBA Governor Bullock’s remarks support the Aussie pair.
- PBoC strengthens financial support for private enterprises in listing and financing, mergers and acquisitions, and restructuring.
- US Dollar seems to halt the losses as US bond yields improve.
The Australian Dollar (AUD) struggles to continue the winning streak for the third successive session on Monday. The AUD/USD pair hovers below the three-month high at 0.6590, and received upward support from the negative tone surrounding the US Dollar (USD). This negative sentiment has been influenced by the mixed S&P Global PMI data, contributing to the Aussie pair’s strength.
Australia’s Dollar experienced a boost in response to positive market sentiment, driven by news of continued stimulus in the Chinese property market. This has improved investors’ mood, as reflected in the positive performance of equity markets. Furthermore, the People’s Bank of China (PBoC) has issued a notice to strengthen financial support for private firms. This comprehensive support encompasses assistance for private enterprises in listing and financing, mergers and acquisitions, as well as restructuring.
AUD faces downward pressure after the release of China Industrial Profit Year-to-Date (YTD) data on China’s industrial profits, narrowing down to a decline of 7.8%, an improvement from the previous drop of 9.0%. In the month of October, there was a positive shift, with industrial enterprises’ profits showing a 2.7% increase, contrasting with the 11.9% decrease observed earlier.
The PBoC has committed to increasing bond issuance by privately owned firms and is actively encouraging lenders not to cut or suspend loans for private companies facing temporary difficulties but exhibiting competitive technologies.
Furthermore, the recent hawkish comments from Reserve Bank of Australia (RBA) Governor Michele Bullock are providing support for the Aussie pair. Bullock emphasized that the inflation challenge is increasingly driven by domestic demand, underscoring that monetary policy tightening is the appropriate response to demand-driven inflation.
US Dollar Index (DXY) attempts to snap the recent losses as US Treasury yields show improvement. This comes amid speculations that the US Federal Reserve (Fed) might ease monetary policy next year. However, Fed officials’ comments last week hinted at the need for further tightening. They also emphasized that decisions would depend on incoming data to take appropriate measures to address inflation concerns.
It is a busy week ahead for Australia and the United States on the economic front. RBA Bullock’s speech, retail sales, and inflation figures will likely be closely watched in Australia, providing insights into the potential monetary policy considerations. In the United States (US), Gross Domestic Product Annualized (Q3), Core PCE – Price Index, and the ISM Manufacturing PMI will be key indicators.
Daily Digest Market Movers: Australian Dollar seems to move on an upward trajectory on hawkish RBA
- RBA’s meeting minutes revealed that the board acknowledged a “credible case” against an immediate rate hike but considered the case for tightening stronger due to increased inflation risks. The decision on further tightening would hinge on data and risk assessment.
- National Australia Bank (NAB) anticipates another RBA rate hike, expecting it to occur at the February 2024 meeting.
- The Federal Open Market Committee (FOMC) meeting minutes revealed that members would further entertain the idea of tightening monetary policy if incoming information suggests insufficient progress toward the Committee’s inflation objective.
- FOMC members unanimously agree that policy should stay restrictive for some time until there is clear and sustainable evidence of inflation moving down toward the Committee’s target.
- US S&P Global Composite PMI for November shows it remained unchanged at 50.7. The Services PMI increased to 50.8 in November from 50.6 in October, surpassing the market consensus of 50.4. However, the Manufacturing PMI eased to 49.4 from 50.0, falling short of the 49.8 estimated.
Technical Analysis: Australian Dollar hovers below the three-month highs aligned to 0.6600 psychological level
The Australian Dollar hovers around the 0.6580 level on Monday, just below the three-month high reached at 0.6590 on Friday, which aligns with the psychological resistance of the 0.6600 level. On the downside, the seven-day Exponential Moving Average (EMA) at 0.6550 could serve as crucial support, followed by the 23.6% Fibonacci retracement at 0.6513. If the pair falls below this level, it may test the major support at the 0.6500 level.
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 weakest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.05% | -0.06% | 0.15% | 0.06% | -0.36% | 0.15% | -0.01% | |
| EUR | 0.05% | 0.00% | 0.20% | 0.12% | -0.31% | 0.21% | 0.04% | |
| GBP | 0.07% | 0.00% | 0.20% | 0.13% | -0.31% | 0.20% | 0.05% | |
| CAD | -0.14% | -0.20% | -0.20% | -0.08% | -0.51% | 0.00% | -0.16% | |
| AUD | -0.08% | -0.13% | -0.14% | 0.07% | -0.44% | 0.09% | -0.08% | |
| JPY | 0.36% | 0.31% | 0.23% | 0.50% | 0.45% | 0.50% | 0.36% | |
| NZD | -0.14% | -0.20% | -0.21% | 0.00% | -0.07% | -0.51% | -0.16% | |
| CHF | 0.01% | -0.03% | -0.04% | 0.17% | 0.12% | -0.34% | 0.17% |
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.