Australian Dollar depreciates as US Dollar remains solid due to less-dovish Fed
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- The Australian Dollar receives downward pressure from economic woes in its largest trading partner China.
- RBA’s Hunter indicated that although inflation expectations remain anchored, persistent price growth continues to present challenges for the central bank.
- The US Dollar appreciates as strong jobs and inflation data have reduced the odds for aggressive easing by the Fed.
The Australian Dollar (AUD) extends its losing streak for the third consecutive day against the US Dollar (USD) on Wednesday, despite hawkish comments from Reserve Bank of Australia (RBA) Deputy Governor Sarah Hunter.
RBA’s Hunter reaffirmed the Australian central bank’s commitment to controlling inflation, noting that while inflation expectations remain anchored, persistent price growth continues to pose challenges.
The Aussie Dollar is facing downward pressure due to economic uncertainty in its largest trading partner, China. Furthermore, China's recently announced fiscal stimulus plan did little to lift market sentiment, as investors remain uncertain about the scale and impact of the package.
The US Dollar (USD) continues to gain support as robust Employment and Consumer Price Index (CPI) data have dampened expectations of aggressive Federal Reserve (Fed) easing. Markets are now anticipating a total of 125 basis points in rate cuts over the next 12 months.
Daily Digest Market Movers: Australian Dollar struggles due to economic uncertainty in China
- According to the CME FedWatch Tool, there is currently a 94.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger 50-basis-point reduction.
- The Westpac Leading Index in Australia remained unchanged in September on a month-over-month basis, marking the sixth consecutive month of stagnation.
- On Tuesday, Federal Reserve Bank of Atlanta President Raphael Bostic stated that he anticipates just one more interest rate cut of 25 basis points this year, as reflected in his projections during last month's US central bank meeting. "The median forecast was for 50 basis points beyond the 50 basis points already implemented in September. My projection was for an additional 25 basis points," he said, according to Reuters.
- The Australian weekly survey of Consumer Confidence showed little movement, with the ANZ-Roy Morgan Consumer Confidence index remaining steady at 83.4 this week. Despite the unchanged figure, the longer-term trend shows that Consumer Confidence has been below the 85.0 mark for a record 89 consecutive weeks. The current reading is 1.3 points higher than the 2024 weekly average of 82.1.
- Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari reassured markets late on Monday by reaffirming the Fed's data-dependent approach. Kashkari reiterated familiar Fed policymaker views on the strength of the US economy, noting continued easing of inflationary pressures and a robust labor market, despite a recent uptick in the overall unemployment rate, per Reuters.
- The AUD might have received downward pressure from a detailed note from the Commonwealth Bank of Australia indicating expectations that the Reserve Bank of Australia (RBA) will implement a 25 basis point rate cut by the end of 2024. The report suggested that a stronger disinflationary trend than the RBA anticipates is essential for the Board to consider easing policy within this calendar year.
- China's military initiated drills on Monday in the Taiwan Strait and around Taiwan. A spokesperson for the US Department of State expressed serious concern regarding the People's Liberation Army's (PLA) military actions. In response, Taiwan's Defense Ministry stated, “We will not escalate conflict in our response.”
- The National Bureau of Statistics of China reported that the country's monthly Consumer Price Index (CPI) remained unchanged at 0% in September, down from August's 0.4% increase. The annual inflation rate rose by 0.4%, falling short of the anticipated 0.6%. Additionally, the Producer Price Index (PPI) decreased by 2.8% year-on-year, a larger drop than the previous decline of 1.8% and exceeding expectations of a 2.5% decrease.
Technical Analysis: Australian Dollar moves below 0.6700; 14-day RSI reinforces the ongoing bearish bias
The AUD/USD pair hovers around 0.6680 on Wednesday. Technical analysis of the daily chart indicates that the pair is moving downward along the upper boundary of a descending channel, signaling a bearish bias. The 14-day Relative Strength Index (RSI) also remains below the 50 level, reinforcing the ongoing bearish momentum.
On the downside, the AUD/USD pair may target its eight-week low of 0.6622, last seen on September 11. A break below this level could open the pair's door to test the descending channel's lower boundary near the psychological support level of 0.6600.
In terms of resistance, if the pair breaks above the upper boundary of the descending channel at 0.6720 level, it may face an initial barrier at the nine-day Exponential Moving Average (EMA) around 0.6738, followed by the key psychological resistance at 0.6800.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | -0.00% | 0.09% | -0.01% | 0.12% | 0.33% | 0.04% | |
| EUR | -0.04% | -0.02% | 0.08% | -0.02% | 0.11% | 0.32% | -0.02% | |
| GBP | 0.00% | 0.02% | 0.08% | 0.00% | 0.13% | 0.34% | 0.05% | |
| JPY | -0.09% | -0.08% | -0.08% | -0.09% | 0.03% | 0.24% | -0.02% | |
| CAD | 0.01% | 0.02% | -0.01% | 0.09% | 0.11% | 0.33% | 0.05% | |
| AUD | -0.12% | -0.11% | -0.13% | -0.03% | -0.11% | 0.22% | -0.07% | |
| NZD | -0.33% | -0.32% | -0.34% | -0.24% | -0.33% | -0.22% | -0.29% | |
| CHF | -0.04% | 0.02% | -0.05% | 0.02% | -0.05% | 0.07% | 0.29% |
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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