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- Australian Dollar grapples to extend gains ahead of US CPI
Australian Dollar grapples to extend gains ahead of US CPI
- Australian Dollar marked to four-week high at 0.6644 on Tuesday.
- Australian currency strengthens on investors' doubts surrounding the RBA’s rate cuts in 2024.
- US Dollar receives downward pressure ahead of US CPI and FOMC minutes.
The Australian Dollar (AUD) attempts to extend gains for the third consecutive session on Wednesday. The AUD/USD pair reached to four-week high at 0.6644 in the previous session as the US Dollar (USD) faced a struggle, which could be attributed to the decline in the US Treasury yields.
The Australian Dollar gains strength as investors become increasingly skeptical about the necessity for the Reserve Bank of Australia (RBA) to implement interest rate cuts in 2024, given the anticipation of the Federal Reserve (Fed) extending its higher interest rate stance.
The Reserve Bank of Australia has indicated that further rate hikes are unlikely, stating that it requires more confidence in the inflation outlook before considering rate cuts. Traders await the Reserve Bank of New Zealand’s (RBNZ) interest rate decision on Wednesday. Furthermore, the focus will shift to the release of the US Consumer Price Index (CPI) data and the FOMC Minutes later in the North American session.
Daily Digest Market Movers: Australian Dollar rises amid doubts surrounding RBA’s rate cuts
- Australia's Westpac Consumer Confidence Index for April indicated a decline of 2.4%, compared to the previous decrease of 1.8%.
- Commonwealth Bank anticipates three 25 basis points (bps) interest rate cuts by the end of the year, starting from September.
- Westpac predicts that interest rate cuts will commence in September, while NAB and ANZ believe it won't be until November.
- Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari emphasized the importance of the central bank's commitment to combatting inflation. Kashkari stressed that despite the current inflation rate hovering around 3%, the Fed must strive to bring it back down to the target level of 2%.
- According to the CME FedWatch Tool, the probability of a 25-basis point rate cut by the Fed in June has slightly increased to 53.5%. However, the likelihood of a rate cut in July has decreased to 49.9%.
- US headline CPI is expected to experience an acceleration in March, whereas the core measure is expected to show a cooling down.
- On Friday, the US Nonfarm Payrolls (NFP) report revealed a notable increase of 303K jobs in March, surpassing both expectations of 200K and the previous reading of 270K. US Average Hourly Earnings rose by 0.3% month-over-month in March, meeting expectations.
Technical Analysis: Australian Dollar hovers around 0.6620 with a bullish sentiment
The Australian Dollar trades around 0.6620 on Wednesday. Technical analysis suggests a bullish sentiment for the AUD/USD pair. The pair could see more gains as the Moving Average Convergence Divergence (MACD) is positioned above the centerline and shows a divergence above the signal line. Key resistance is observed around the major level of 0.6650, followed by March’s high of 0.6667. On the downside, key support is identified around the 23.6% Fibonacci retracement level of 0.6605 and the psychological level of 0.6600. Further support lies at the nine-day Exponential Moving Average (EMA) of 0.6584 and the major support level of 0.6550.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.05% | 0.05% | -0.03% | 0.16% | -0.01% | 0.13% | 0.10% | |
| EUR | -0.06% | -0.01% | -0.07% | 0.10% | -0.06% | 0.06% | 0.05% | |
| GBP | -0.05% | -0.01% | -0.07% | 0.10% | -0.06% | 0.07% | 0.05% | |
| CAD | 0.01% | 0.06% | 0.08% | 0.17% | 0.01% | 0.13% | 0.12% | |
| AUD | -0.16% | -0.11% | -0.08% | -0.17% | -0.16% | -0.04% | -0.04% | |
| JPY | 0.00% | 0.06% | 0.07% | -0.02% | 0.17% | 0.14% | 0.11% | |
| NZD | -0.13% | -0.08% | -0.07% | -0.14% | 0.03% | -0.14% | -0.03% | |
| CHF | -0.11% | -0.05% | -0.05% | -0.11% | 0.05% | -0.11% | 0.02% |
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
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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