Australian Dollar continues the winning streak after upbeat Aussie CPI data

Australian Dollar moves upward toward a major level after stronger Aussie CPI data.
Australia’s CPI climbed to 1.2% in Q3, exceeding the market consensus of 1.1%.
US Dollar received upward support from upbeat PMI figures from the United States.

The Australian Dollar (AUD) continues to gain ground, trading higher for the third successive day on Wednesday. The AUD/USD pair receives upward support due to the hawkish comments from Reserve Bank of Australia (RBA) Governor Michelle Bullock.

Australia’s Bureau of Statistics (ABS) reported on Wednesday that the Consumer Price Index (CPI) registered growth in the third quarter of 2023, surpassing the increase observed in the second quarter.

Australia’s Chief Policymaker addressed at the Commonwealth Bank of Australia Global Markets Conference in Sydney on Tuesday, underscored the dedication to achieving the inflation target in a sensible timeframe.

Governor Bullock hinted that the present cash rate could serve this goal adequately, Bullock recognized the potential hazards of inflation converging back to the target at a slower pace than expected. The board holds a limited tolerance for such variances and is prepared to increase rates if there's a substantial upward adjustment to the inflation outlook.

Investors will closely monitor RBA Governor Bullock's remarks regarding the condition of the Australian economy as she testifies before the Senate Economics Legislative Committee in Canberra on Thursday.

The US Dollar Index (DXY) consolidates post-trimming recent losses on the back of upbeat preliminary S&P Global PMI figures from the United States released on Tuesday. However, the downfall in US Treasury yields could provide downward pressure for the US Dollar (USD).

US economic indicators have eased concerns about the potential negative impact of a more restrictive monetary policy and increased borrowing costs on investment and industrial activity.

Daily Digest Market Movers: Australian Dollar extends its gains on upbeat CPI data, hawkish RBA’s comments

Australian Bureau of Statistics (ABS) revealed that the nation's Consumer Price Index (CPI) reached 1.2% in the third quarter of 2023, surpassing the 0.8% increase recorded in the second quarter. This figure exceeded the market consensus, which anticipated a growth of 1.1% in the same period.
Australian S&P Global Composite PMI for October declined to 47.3 from the previous reading of 51.5. Manufacturing PMI eased to 48.0 compared to the prior figure of 48.7, while the Services PMI fell back into contraction, dropping to 47.6 from the previous month's reading of 51.8.
Westpac's Chief Economist, Luci Ellis stated in a note that the core view presented that the Consumer Price Index (CPI) is expected to continue tracking lower and return to the RBA’s 2-3 percent target band in 2025, aligning with the central bank’s own expectations.
Ellis highlighted several broader risks to the economy and inflation outlook that are being closely monitored. These include the resurgence of housing prices to levels close to pre-pandemic peaks, a global rise in bond yields, and China's slower-than-expected recovery from a prolonged period of COVID-related lockdowns.
Australia's central bank expressed heightened concern about the inflation impact stemming from supply shocks. Governor of the Reserve Bank of Australia, Michele Bullock stated that if inflation persists above projections, the RBA will take responsive policy measures. There is an observable deceleration in demand, and per capita consumption is on the decline.
China is set to host a significant financial policy meeting early next week, occurring once every five years. The primary objectives of this gathering are to proactively address and mitigate risks and to establish medium-term priorities for the expansive $61 trillion financial industry.
US Treasury Department officially confirmed on Tuesday that the first meeting of the economic working group between the United States and China took place. This working group serves as a platform for discussing bilateral economic policy matters.
S&P Global Composite PMI saw an increase in October, reaching 51.0 from 50.2. The Services PMI experienced growth, reaching 50.9, while the Manufacturing PMI rose to 50.0. This marks the first instance in the last six months where manufacturing has remained above the 50-point threshold, indicating a positive shift in that sector.
The 10-year Treasury yield surged to 5.02%, marking its first time at such levels since 2007. However, it promptly reversed direction, standing at 4.82% by the press time.
Market participants will likely shift their focus on monitoring the US Q3 Gross Domestic Product (GDP) on Thursday. The US Core Personal Consumption Expenditures (PCE) and Australia’s Producer Price Index (PPI) will be eyed on Friday.

Technical Analysis: Australian Dollar hovers below the major resistance at 0.6400

The Australian Dollar hovers around the 0.6390 on Wednesday aligned with the major resistance at 0.6400. A breakthrough above this resistance holds the potential to reach around the 23.6% Fibonacci retracement level at 0.6429. On the downside, the immediate support emerges around the seven-day Exponential Moving Average (EMA) at 0.6353, following the 0.6300 major level lined up with the monthly low at 0.6285.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the US Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.00%	-0.04%	-0.03%	-0.46%	-0.01%	-0.22%	-0.03%
EUR	0.00%		-0.04%	-0.03%	-0.44%	-0.01%	-0.22%	-0.03%
GBP	0.05%	0.05%		0.01%	-0.43%	0.05%	-0.20%	0.01%
CAD	0.03%	0.05%	0.00%		-0.41%	0.03%	-0.18%	0.00%
AUD	0.49%	0.49%	0.45%	0.46%		0.47%	0.25%	0.45%
JPY	0.01%	0.02%	-0.04%	-0.06%	-0.47%		-0.22%	-0.03%
NZD	0.25%	0.25%	0.20%	0.21%	-0.20%	0.23%		0.21%
CHF	0.03%	0.04%	-0.01%	0.00%	-0.45%	0.03%	-0.21%

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).

Australian Dollar FAQs

What key factors drive the Australian Dollar?

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.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

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.

How does the health of the Chinese Economy impact the Australian Dollar?

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.

How does the price of Iron Ore impact the Australian Dollar?

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.

How does the Trade Balance impact the Australian Dollar?

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.