- Australian Dollar recovers ground as the Greenback snaps recent gains.
- Australia’s Judo Bank Manufacturing PMI fell to 47.7 from the previous reading of 48.2.
- China’s Manufacturing PMI improved to 50.7 against the expected decline to 49.8 from 49.5 prior.
- US Core PCE Price Index YoY and MoM eased at 3.5% and 0.2%, respectively.
The Australian Dollar (AUD) manages to halt a two-day losing streak on Friday. However, the recovery in the US Dollar contributed a pressure on the AUD/USD pair. Furthermore, disappointing Chinese data on Thursday exerted downward pressure on market sentiment, causing the Australian Dollar (AUD) to decline.
Australia’s Judo Bank Manufacturing PMI for November met expectations at 47.7, showing a slight dip from the previous reading of 48.2. The Reserve Bank of Australia is set to release the RBA Commodity Index SDR later today. This data holds significance as it serves as an early indicator of changes in export prices, thereby influencing both GDP and the value of the AUD.
China’s Caixin Manufacturing PMI exceeded expectations by improving to 50.7 in November, defying the anticipated decline to 49.8 from the previous reading of 49.5. This positive surprise in the data has the potential to provide support and bolster the Australian Dollar, given the interconnected economic dynamics between China and Australia.
The US Dollar Index (DXY) surged as the US Treasury bond yield edged higher, with the 2- and 10-year Treasury yields reaching 4.73% and 4.36%, respectively on Thursday. Furthermore, the Greenback might have found support in economic data from the United States (US).
US Core Personal Consumption Expenditures Price Index (PCE) showed a year-on-year easing to 3.5% in October from the previous reading of 3.7%, aligning with expectations. The month-on-month Core PCE Price Index decreased to 0.2% from the prior 0.3%. Additionally, Initial Jobless Claims for the week ending November 24 totaled 218K, slightly below the anticipated 220K but higher than the revised previous figures of 211K (revised from 209K).
Investors await US ISM Manufacturing PMI for November, along with US Federal Reserve (Fed) Chairman Jerome Powell’s speech on Friday.
Daily Digest Market Movers: Australian Dollar gains ground on subdued US Dollar
- 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%.
- Aussie 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%.
- 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.
- 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. The Non-Manufacturing PMI contracted to 50.2, falling short of the expected 51.1 and the previous reading of 50.6.
- 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.
- The latest Fed’s Beige Book unveiled that the demand for labor has been “continuing to ease” over the weeks leading up to mid-November.
Technical Analysis: Australian Dollar maintains its position below the 0.6650 resistance level
The Australian Dollar trades higher around 0.6620 on Friday. The immediate hurdle appears to be the significant level at 0.6650, with November’s high at 0.6676 following closely. If the pair successfully surpasses this level, it could pave the way for a test of the substantial resistance at the psychological mark of 0.6700, and beyond that, the August high at 0.6723. Conversely, on the downside, a critical support zone is situated around the psychological level of 0.6600, aligning with the seven-day Exponential Moving Average (EMA) at 0.6599. A clear breach below the EMA might lead the pair towards support near the 23.6% Fibonacci retracement level at 0.6580, 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 | -0.12% | -0.08% | -0.10% | -0.03% | 0.01% | -0.13% | -0.04% | |
| EUR | 0.12% | 0.03% | 0.01% | 0.07% | 0.12% | -0.02% | 0.08% | |
| GBP | 0.08% | -0.03% | -0.03% | 0.04% | 0.08% | -0.05% | 0.04% | |
| CAD | 0.10% | -0.01% | 0.03% | 0.07% | 0.11% | -0.02% | 0.08% | |
| AUD | 0.03% | -0.08% | -0.04% | -0.07% | 0.04% | -0.09% | 0.00% | |
| JPY | -0.01% | -0.09% | -0.09% | -0.12% | -0.02% | -0.12% | -0.03% | |
| NZD | 0.12% | 0.01% | 0.05% | 0.02% | 0.09% | 0.13% | 0.09% | |
| CHF | 0.02% | -0.09% | -0.05% | -0.08% | 0.00% | 0.03% | -0.10% |
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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