- Australian Dollar recovers the recent losses as the Greenback struggles to hold ground.
- Australia’s Private Capital Expenditure declined by 0.6% in Q3, against the expected rise of 1.0%.
- China’s Manufacturing and Non-Manufacturing PMI both fell to 49.4 and 50.02, respectively.
- US GDP Annualized data increased by 5.2% as compared to the 4.9% prior.
The Australian Dollar (AUD) recovers the recent losses, despite downbeat economic data from Australia on Thursday. The AUD/USD pair retraced from its nearly four-month high at 0.6676 in the previous session. The downward pressure on the Aussie pair can be attributed to the recovery of the US Dollar (USD).
Australia’s Private Capital Expenditure experienced a decline of 0.6% in Q3, contrasting with the previous growth of 2.8%. This contraction fell short of the expected rise of 1.0%. The data, released by the Australian Bureau of Statistics, indicates a decrease in both current and future capital expenditure intentions within the private sector of the country. This could ease the inflationary pressure, which reduces the likelihood of an interest rate hike by the Reserve Bank of Australia (RBA).
China’s NBS Manufacturing PMI for November decreased to 49.4 from the previous reading of 49.5. The market expectation was for an increase to 49.7. Additionally, the Non-Manufacturing PMI contracted to 50.02, falling short of the expected 51.1 and the previous reading of 50.6. The downbeat PMI data could spark discussions about the need for more stimulus, which is benefiting the Australian Dollar.
The US Dollar Index (DXY) managed to halt its four-day losing streak on Wednesday. This stabilization was supported by stronger-than-expected US Gross Domestic Product Annualized data released by the US Bureau of Economic Analysis. The US GDP data indicated an increase in the value of the final goods and services produced in the United States during the third quarter. However, the DXY struggles to maintain its position on Thursday.
United States is set to release crucial economic data later in the North American session. Among the notable reports are the weekly Jobless Claims for the week ending on November 24, with an expected increase to 220K from the previous 209K. Additionally, the Core Personal Consumption Expenditure (PCE) Price Index for October will be released, with expectations of a slowdown in consumer inflation. The anticipated annual rate is expected to decrease from 3.7% to 3.5%.
Daily Digest Market Movers: Australian Dollar receives upward support amid hawkish RBA
- Australia’s Monthly Consumer Price Index (CPI) for October shows a reading of 4.9%, a decrease from the previous reading of 5.6% in September and slightly below the expected 5.2%.
- Australia’s seasonally adjusted Retail Sales data showed monthly readings for October, which declined by 0.2% against the market expectations of a 0.1% rise and 0.9% prior.
- Reserve Bank of Australia (RBA) Governor Michele Bullock highlighted that the current monetary policy is on the restrictive side, with rate hikes putting a damper on demand, particularly in the context of persistent services inflation.
- Governor Bullock emphasized the need for caution in employing high interest rates to combat inflation without inadvertently raising the unemployment rate.
- US Federal Reserve Governor Christopher Waller suggested that if inflation consistently declines, there’s no need to maintain high-interest rates.
- US Gross Domestic Product Annualized increased by 5.2% during the third quarter from the previous reading of 4.9%, above the market consensus of 5.0.
- US Housing Price Index (MoM) remained consistent at 0.6% in September against the expected figure of 0.4%.
- The CB Consumer Confidence Index experienced an increase in November, rising to 102.0. This uptick comes after a downward revision of October figures, which were adjusted from 102.6 to 99.1.
Technical Analysis: Australian Dollar hovers below the barrier at 0.6650 major level
The Australian Dollar trades at higher levels around 0.6630 on Thursday. The major level at 0.6650 could be the immediate resistance, followed by a significant barrier at the psychological level of 0.6700. A successful breakthrough above this level may provide support for the AUD/USD pair, opening the possibility of testing the resistance around August’s high at 0.6723. Conversely, key support is positioned around the seven-day Exponential Moving Average (EMA) at 0.6597. A decisive break below the EMA could potentially lead the pair to reach support near the 23.6% Fibonacci retracement level at 0.6576, followed by the major level at 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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | -0.04% | -0.07% | -0.26% | 0.03% | -0.36% | -0.12% | |
| EUR | 0.01% | -0.04% | -0.06% | -0.25% | 0.05% | -0.35% | -0.13% | |
| GBP | 0.04% | 0.04% | -0.01% | -0.22% | 0.09% | -0.31% | -0.08% | |
| CAD | 0.07% | 0.06% | 0.03% | -0.21% | 0.10% | -0.30% | -0.06% | |
| AUD | 0.23% | 0.25% | 0.21% | 0.19% | 0.30% | -0.10% | 0.13% | |
| JPY | -0.04% | -0.03% | -0.07% | -0.10% | -0.32% | -0.38% | -0.14% | |
| NZD | 0.35% | 0.35% | 0.31% | 0.28% | 0.10% | 0.38% | 0.24% | |
| CHF | 0.13% | 0.12% | 0.08% | 0.05% | -0.14% | 0.15% | -0.24% |
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).
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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