Australian Dollar fails to find support from robust employment data
|- The Australian Dollar declined despite the higher-than-expected Employment Change.
- Australia’s Unemployment Rate dropped to 4.0% from April’s 4.1% rate, as expected.
- The US Dollar recovered losses as FOMC left its benchmark lending rate in a range of 5.25%–5.50% for the seventh time in a row.
The Australian Dollar (AUD) edges lower despite the employment data release on Thursday. Australia’s Employment Change showed that the number of employed people increased by 39.7K in May, exceeding the expected 30.0K increase and the previous 38.5K rise. Meanwhile, the Unemployment Rate came in at 4.0%, below April’s 4.1% rate as expected.
The US Dollar (USD) recovered its recent losses after the hawkish hold from the US Federal Reserve (Fed), undermining the AUD/USD pair. Investors await the US weekly Initial Jobless Claims and Producer Prices Index (PPI) on Thursday to gain further impetus on economic conditions in the United States (US).
The Federal Open Market Committee (FOMC) left its benchmark lending rate in a range of 5.25%–5.50% for the seventh time in a row at its June meeting on Wednesday, as widely expected.
Daily Digest Market Movers: Australian Dollar inches lower as Fed maintains a hawkish stance
- In a press conference post Fed decision, Fed Chair Jerome Powell noted that the restrictive stance on monetary policy is having the effect on inflation that the central bank had expected. Additionally, FOMC policymakers expect just one rate cut this year, down from three in March.
- US Consumer Price Index (CPI) rose 3.3% YoY in May, compared to the previous reading and the expectations of 3.4%. The core CPI, excluding volatile food and energy prices, increased 3.4% YoY in May, compared to a 3.6% rise in April and the estimation of 3.5%.
- On Wednesday, China’s CPI increased by 0.3% year-over-year in May, missing expectations for a 0.4% rise. Inflation decreased by 0.1% MoM versus April’s 0.1% increase.
- Australian Treasurer Jim Chalmers stated that the visit of China's Premier Li Qiang to Australia is an important opportunity. Chalmers noted underlying weaknesses in China's economy and expressed that he does not expect China's economy to recover immediately.
- Australia's NAB Business Confidence index dropped to -3 index points in May, marking the lowest figure in six months and turning negative for the first time since last November. Meanwhile, Business Conditions fell to 6 index points, slightly below the long-run average.
- On Tuesday, National Australia Bank (NAB) Chief Economist Alan Oster commented, “There are warning signs on the outlook for growth but at the same time reasons to be very wary about the inflation outlook, and they expect the RBA to keep rates on hold for some time yet as they navigate through these contrasting risks,” as per the official transcript.
- Last week, RBA Governor Michele Bullock indicated that the central bank is prepared to increase interest rates if the Consumer Price Index (CPI) does not return to the target range of 1%-3%, according to NCA NewsWire.
Technical Analysis: Australian Dollar hovers around 0.6650
The Australian Dollar trades around 0.6660 on Thursday. Analysis of the daily chart indicates a neutral bias for the AUD/USD pair as it consolidates within the rectangle formation. The 14-day Relative Strength Index (RSI) is positioned slightly below the 50 level. A further movement may suggest a clear directional trend.
Immediate support region is identified around the 50-day Exponential Moving Average (EMA) at 0.6604, followed by the lower boundary of the rectangle formation around the level of 0.6585.
On the upside, the AUD/USD pair could explore the region around the upper threshold of the rectangle formation around the level of 0.6700, followed by May’s high of 0.6714.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.09% | 0.14% | 0.19% | 0.26% | 0.23% | 0.31% | 0.15% | |
| EUR | -0.09% | 0.05% | 0.11% | 0.18% | 0.17% | 0.23% | 0.09% | |
| GBP | -0.16% | -0.06% | 0.04% | 0.10% | 0.08% | 0.16% | 0.00% | |
| CAD | -0.19% | -0.10% | -0.04% | 0.05% | 0.03% | 0.12% | -0.03% | |
| AUD | -0.26% | -0.17% | -0.10% | -0.05% | -0.02% | 0.07% | -0.10% | |
| JPY | -0.23% | -0.16% | -0.06% | -0.02% | 0.01% | 0.08% | -0.06% | |
| NZD | -0.32% | -0.23% | -0.18% | -0.13% | -0.07% | -0.10% | -0.18% | |
| CHF | -0.17% | -0.07% | -0.01% | 0.04% | 0.08% | 0.07% | 0.15% |
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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