- The Australian Dollar received downward pressure from concerns over glooming China’s economy.
- The Aussie Dollar’s downside could be restrained due to hawkish sentiment surrounding the Reserve Bank of Australia’s policy outlook.
- The US Dollar struggles due to rising odds of an aggressive Federal Reserve interest rate cut on Wednesday.
The Australian Dollar (AUD) recovers its intraday losses against the US Dollar (USD) on Tuesday following dovish sentiment surrounding the US Federal Reserve interest rate decision. However, the Aussie Dollar faced challenges due to growing concerns over the health of China’s economy. Analysts point out that the latest round of weak economic data indicates serious challenges for the world’s second-largest economy. Since China is a key trading partner for Australia, fluctuations in China’s economic health can have a significant effect on the Australian market.
Economists at Goldman Sachs and Citi have reduced their 2024 GDP growth forecasts for China to 4.7%, falling short of Beijing’s target of around 5.0%. SocGen describes the situation as a “downward spiral,” while Barclays calls it “from bad to worse” and a “vicious cycle.” Morgan Stanley also cautions that “things could get worse before they get better,” according to a Reuters report.
The AUD/USD pair’s downside may be limited, as the Australian Dollar remains supported by the Reserve Bank of Australia’s (RBA) hawkish stance. Meanwhile, the US Dollar faces pressure amid increasing expectations of an aggressive 50 basis points Fed rate cut on Wednesday.
According to the CME FedWatch Tool, markets are pricing in a 38.0% chance of a 25 basis point Federal Reserve interest rate cut at the September meeting, while the probability of a 50 basis point cut has surged to 62.0%, up from 50.0% just a day earlier. This shift reflects heightened anticipation of more aggressive monetary easing.
Daily Digest Market Movers: Australian Dollar holds position ahead of Fed interest rate decision
- ANZ-Roy Morgan Consumer Confidence climbed 1.8 points, reaching an eight-week high of 84.1. While ANZ notes that the rise was broad-based, confidence remains firmly in pessimistic territory.
- The University of Michigan’s Consumer Sentiment Index rose to 69.0 in September, exceeding the market expectations of 68.0 reading and marking a four-month high. This increase reflects a gradual improvement in consumers’ outlook on the US economy after months of declining economic expectations.
- China’s economy weakened in August, with a continued slowdown in industrial activity and declining real estate prices, as Beijing faces growing pressure to increase spending to boost demand. According to Business Standard, this was reported by the National Bureau of Statistics on Saturday.
- China’s Retail Sales grew by 2.1% year-on-year in August, slowing from 2.7% in the previous month and falling short of the market consensus of 2.5%.
- The US Producer Price Index (PPI) rose to 0.2% month-on-month in August, exceeding the forecasted 0.1% increase and the previous 0.0%. Meanwhile, core PPI accelerated to 0.3% MoM, against the expected 0.2% rise and July’s 0.2% decline.
- Australia’s Consumer Inflation Expectations eased to 4.4% in September, down slightly from August’s four-month high of 4.5%. This decline highlights the central bank’s efforts to balance bringing inflation down within a reasonable timeframe and maintaining gains in the labor market.
- The Reserve Bank of Australia (RBA) has maintained a hawkish stance, with RBA Governor Michele Bullock stating that it is premature to consider rate cuts due to persistently high inflation. RBA Assistant Governor Sarah Hunter also noted that while the labor market remains tight, wage growth appears to have peaked and is expected to slow further.
Technical Analysis: Australian Dollar rises to 0.6750; next barrier at seven-month highs
The AUD/USD pair trades near 0.6750 on Tuesday. Technical analysis of the daily chart indicates that the pair has broken above the upper boundary of a descending channel, indicating a weakening of a bearish bias. Additionally, the 14-day Relative Strength Index (RSI) is positioned slightly above the 50 level, suggesting a shift in momentum from a bearish to a bullish trend.
Regarding the upside, a breach above the descending channel has triggered a bullish bias for the AUD/USD pair. This could push the pair toward its seven-month high of 0.6798 and test the psychological level of 0.6800.
On the downside, the AUD/USD pair could find immediate support around the nine-day Exponential Moving Average (EMA) at the 0.6719 level, followed by the upper boundary of the descending channel at 0.6690. A return to the descending channel would reinforce the bearish bias and lead the pair to navigate the region around the throwback support zone near 0.6575, followed by the lower boundary of the descending channel at 0.6550 level.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.06% | -0.06% | 0.04% | -0.03% | 0.07% | -0.09% | |
| EUR | -0.03% | 0.03% | -0.11% | -0.03% | -0.06% | 0.04% | -0.11% | |
| GBP | -0.06% | -0.03% | -0.11% | -0.03% | -0.09% | 0.01% | -0.16% | |
| JPY | 0.06% | 0.11% | 0.11% | 0.10% | 0.04% | 0.15% | -0.03% | |
| CAD | -0.04% | 0.03% | 0.03% | -0.10% | -0.05% | 0.05% | -0.13% | |
| AUD | 0.03% | 0.06% | 0.09% | -0.04% | 0.05% | 0.09% | -0.09% | |
| NZD | -0.07% | -0.04% | -0.01% | -0.15% | -0.05% | -0.09% | -0.18% | |
| CHF | 0.09% | 0.11% | 0.16% | 0.03% | 0.13% | 0.09% | 0.18% |
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).
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.
Next release: Wed Sep 18, 2024 18:00
Frequency: Irregular
Consensus: 5.25%
Previous: 5.5%
Source: Federal Reserve
Read the full article here
