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- Australian Dollar recovers losses after GDP, China Services PMI
Australian Dollar recovers losses after GDP, China Services PMI
- The Australian Dollar remains weaker following the mixed economic data on Wednesday.
- Australia’s Gross Domestic Product grew by 0.2% QoQ in Q2, an improvement from the previous quarter’s growth of 0.1%.
- The US ISM Manufacturing PMI inched up to 47.2 in August from 46.8 in July.
The Australian Dollar (AUD) pares daily losses against the US Dollar (USD) following the release of the key economic data on Wednesday. Australia’s Gross Domestic Product (GDP) posted a 0.2% reading QoQ for the second quarter, up from the previous quarter’s 0.1% but falling short of the expected 0.3% readings. Additionally, China's Services Purchasing Managers' Index (PMI) fell from 52.1 in July to 51.6 in August, given the fact that both countries are close trade partners.
The upbeat Australian August Purchasing Managers Index (PMI) might have provided some support to the Australian Dollar (AUD) and limited the downside of the AUD/USD pair. Traders are now focusing on the upcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock on Thursday, to gather more insights into the central bank's hawkish stance on monetary policy.
The US Dollar receives support as traders evaluate the economic and monetary outlook. The ISM Manufacturing PMI indicated that factory activity contracted for the fifth consecutive month, with the pace of decline slightly exceeding expectations. This renewed concerns about the impact of elevated interest rates on the health of the US economy.
Traders now await more economic data due this week, including the ISM Services PMI and Nonfarm Payrolls (NFP) to shed light on the potential size of an expected rate cut by the Fed this month.
Daily Digest Market Movers: Australian Dollar extends losses after key economic data
- The Judo Bank Composite PMI climbed to 51.7 in August, up from 51.4 in July, signaling the fastest expansion in three months. This growth was primarily fueled by a rise in services activity, with the Services PMI reaching 52.5 in August, up from 52.2 in July, marking the seventh consecutive month of growth in the services sector.
- The US ISM Manufacturing PMI inched up to 47.2 in August from 46.8 in July, falling short of market expectations of 47.5. This marks the 21st contraction in US factory activity over the past 22 months.
- Australia’s Building Permits surged by 10.4% month-over-month in July, sharply rebounding from a 6.5% decline in June, marking the strongest growth since May 2023. On an annual basis, the growth rate reached 14.3%, a significant recovery from the previous 3.7% decline.
- China’s Caixin Manufacturing PMI rose to 50.4 in August, up from 49.8 in July, which is particularly noteworthy given China’s close trade relationship with Australia.
- The US Bureau of Economic Analysis reported on Friday that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous reading of 2.5% but falling short of the estimated 2.6%. Meanwhile, the core PCE, which excludes volatile food and energy prices, rose by 2.6% year-over-year in July, consistent with the prior figure of 2.6% but slightly below the consensus forecast of 2.7%.
- 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.
- 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.
Technical Analysis: Australian Dollar falls to near 0.6700
The Australian Dollar trades around 0.6700 on Wednesday. Analyzing the daily chart, the AUD/USD pair has breached below the nine-day Exponential Moving Average (EMA), suggesting a short-term bearish trend. Additionally, the 14-day Relative Strength Index (RSI) has also moved below the 50 level, confirming the bearish bias.
On the downside, the AUD/USD pair may navigate region around the throwback level at 0.6575, with further decline possibly targeting the lower support at 0.6470.
In terms of resistance, the AUD/USD pair may test immediate support around the 14-day EMA at 0.6729, followed by the nine-day EMA at 0.6742. A break above these EMAs could support the pair to test the seven-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 weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | 0.02% | -0.06% | -0.06% | 0.12% | 0.08% | -0.16% | |
| EUR | 0.10% | 0.13% | 0.03% | 0.06% | 0.22% | 0.21% | -0.07% | |
| GBP | -0.02% | -0.13% | -0.08% | -0.08% | 0.09% | 0.10% | -0.20% | |
| JPY | 0.06% | -0.03% | 0.08% | 0.00% | 0.18% | 0.14% | -0.11% | |
| CAD | 0.06% | -0.06% | 0.08% | -0.01% | 0.16% | 0.16% | -0.13% | |
| AUD | -0.12% | -0.22% | -0.09% | -0.18% | -0.16% | -0.01% | -0.27% | |
| NZD | -0.08% | -0.21% | -0.10% | -0.14% | -0.16% | 0.01% | -0.27% | |
| CHF | 0.16% | 0.07% | 0.20% | 0.11% | 0.13% | 0.27% | 0.27% |
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.
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