Market news
08.08.2024, 01:52

Australian Dollar attracts buyers due to odds of RBA maintaining hawkish stance

  • The Australian Dollar could appreciate due to expectations of the RBA’s maintaining higher rates.
  • The upside of the AUD could be limited as softer Q2 inflation diminished the odds of another RBA rate hike.
  • CME FedWatch tool suggests 72.0% odds of a 50-basis point Fed rate cut in September, up from 11.8% last week.

The Australian Dollar (AUD) moves sideways against the US Dollar (USD) with a positive bias on Thursday. This AUD/USD pair may appreciate due to the Reserve Bank of Australia's (RBA) hawkish hold of the cash rate at 4.35% on Tuesday. Furthermore, RBA Governor Michele Bullock has indicated that inflation is still too high, and a rate cut is not anticipated in the near future.

However, Australia’s recent inflation figures for the second quarter have reduced the expectations for another RBA rate hike, which could put a cap on the upside of the Australian Dollar. Markets are now projecting an RBA rate cut in November, a shift from the earlier forecast for April of next year.

The US Federal Reserve (Fed) is widely anticipated to implement a more aggressive rate cut beginning in September, following weaker employment data from July that has heightened concerns about a potential US recession.

According to the CME FedWatch tool, there is now a 72.0% probability of a 50-basis point (bps) interest rate cut by the US Federal Reserve (Fed) in September, up from 11.8% a week earlier. The expectation of deeper rate cuts may put pressure on the US Dollar in the near term.

Daily Digest Market Movers: Australian Dollar consolidates with a positive bias

  • The Australian Dollar might encounter difficulties due to increased risk aversion linked to escalating tensions in the Middle East. According to two US intelligence officials, Iran and its allies are preparing potential retaliation against Israel. This response is expected following the recent killings of a top military commander of Iran’s Hezbollah in Lebanon and a senior Hamas leader in Tehran, as reported by CNN.
  • China's Trade Balance showed a surplus of 84.65 billion for July, falling short of the 99.0 billion expected and 99.05 billion previously. Exports (YoY) came in at 7.0% vs. 9.7% expected and 8.6% previously. Meanwhile, Imports increased 7.2% YoY against 3.5% expected, swinging from a decline of 2.3% prior. Any change in the Chinese economy could impact the Australian market as both countries are close trade partners.
  • The AiG Australian Industry Index showed a slight easing in contraction in July, improving to -20.7 from the previous -25.6 reading. Despite this improvement, the index has indicated contraction for the past twenty-seven months.
  • On Wednesday, Treasurer Jim Chalmers contested the RBA's view that the economy remains too robust and that large government budgets are contributing to prolonged inflation, according to Macrobusiness.
  • On Tuesday, RBA Governor Michele Bullock mentioned that the board had seriously considered increasing the cash rate from 4.35% to 4.6% due to ongoing concerns about excess demand in the economy. Additionally, RBA Chief Economist Sarah Hunter noted on Wednesday that the Australian economy is performing somewhat stronger than previously anticipated by the RBA.
  • According to Reuters, Federal Reserve Bank of San Francisco President Mary Daly expressed increased confidence on Monday that US inflation is moving towards the Fed's 2% target. Daly noted that “risks to the Fed's mandates are becoming more balanced and that there is openness to the possibility of cutting rates in upcoming meetings.”
  • Chicago Fed President Austan Goolsbee stated on Monday that the US central bank is prepared to act if economic or financial conditions worsen. Goolsbee emphasized, "We're forward-looking about it, and so if the conditions collectively start coming in like that on the through line, there’s deterioration on any of those parts, we’re going to fix it.” according to Reuters.

Technical Analysis: Australian Dollar hovers around 0.6550

The Australian Dollar trades around 0.6530 on Thursday. The daily chart analysis shows that the AUD/USD pair is consolidating above the descending channel, signaling a weakening of a bearish bias. Furthermore, the 14-day Relative Strength Index (RSI) is rising from the oversold 30 level, indicating a potential for further upward movement.

In terms of support, the AUD/USD pair may find support at the upper boundary of the descending channel around the throwback support of 0.6470 level. A break below the latter could exert downward pressure on the pair to test the lower boundary of the descending channel around the level of 0.6420

On the upside, the nine-day Exponential Moving Average (EMA) at 0.6535 serves as immediate resistance, with additional resistance at the 0.6575 level, where "throwback support" has turned into resistance. A breakout above this level could push the AUD/USD pair toward a six-month high of 0.6798.

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 British Pound.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   -0.03% 0.06% -0.32% -0.09% -0.09% -0.02% -0.26%
EUR 0.03%   0.09% -0.29% -0.08% -0.07% 0.00% -0.24%
GBP -0.06% -0.09%   -0.39% -0.18% -0.18% -0.11% -0.34%
JPY 0.32% 0.29% 0.39%   0.16% 0.18% 0.21% -0.00%
CAD 0.09% 0.08% 0.18% -0.16%   0.00% 0.08% -0.17%
AUD 0.09% 0.07% 0.18% -0.18% -0.01%   0.07% -0.17%
NZD 0.02% -0.01% 0.11% -0.21% -0.08% -0.07%   -0.25%
CHF 0.26% 0.24% 0.34% 0.00% 0.17% 0.17% 0.25%  

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.

© 2000-2024. All rights reserved.

This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).

The information on this website is for informational purposes only and does not constitute any investment advice.

The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.

AML Website Summary

Risk Disclosure

Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.

Privacy Policy

Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.

Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.

Bank
transfers
Feedback
Live Chat E-mail
Up
Choose your language / location