Australian Dollar consolidates amid a subdued US Dollar, awaits speeches from Fed members
|- Australian Dollar rises as US Dollar loses ground due to the downbeat US bond yields.
- Australia's currency strengthens on hawkish remarks from RBA’s Bullock.
- Fed’s Powell emphasized on closely monitoring inflation's movement toward the 2% target.
The Australian Dollar (AUD) extends its gains for the second consecutive day on a subdued US Dollar (USD), which could be attributed to the decline in the US bond yields. Moreover, the hawkish comments from the Reserve Bank of Australia (RBA) Governor Michele Bullock provided support to strengthening the Aussie Dollar, which in turn, underpinned the AUD/USD pair.
Australian central bank kept its Official Cash Rate (OCR) unchanged at 4.35% on Tuesday, a decision that was widely anticipated. Governor Bullock, in the press conference following the interest rate decision, refrained from making definitive statements about future policy actions, neither ruling anything in nor out. However, there is limited room for RBA policymakers to raise interest rates further as the Australian economy is going through a cost-of-living crisis.
The US Dollar Index (DXY) continues to lose ground despite the hawkish comments from Federal Reserve (Fed) Chair Jerome Powell. Powell dampened expectations of a rate cut and emphasized the importance of closely monitoring inflation's movement toward the 2% core target.
Fed Bank of Cleveland President Loretta Mester remarked on Tuesday that the US central bank might consider lowering interest rates later in the year. However, she cautioned against acting too hastily. Additionally, Fed Bank of Philadelphia President Patrick Harker expressed support for the Fed's decision to keep interest rates steady last week, citing an outlook that suggests further declines in inflation.
Daily Digest Market Movers: Australian Dollar strengthens amid a weaker US Dollar
- Australia’s December AiG Industry Index came in at -27.3 as compared to the -22.4 prior.
- Australia’s Retail Sales (QoQ) improved with a 0.3% rise in the fourth quarter compared to the previous growth of 0.2%.
- Australian Trade Balance (MoM) for January was reduced to the figure of 10,959M compared to the revised figure of 11,764M in December.
- Australia’s Judo Bank Composite Purchasing Managers Index (PMI) improved to 49 in January from 48.1 prior. The Services PMI saw an improvement, rising to 49.1 from the previous figure of 47.9.
- Chinese Caixin Services PMI reduced to 52.7 in January from the previous reading of 52.9.
- US ISM Services PMI exceeded expectations, registering at 53.4, surpassing both the consensus figure of 52.0 and the previous month's 50.5.
- The US Services Employment Index saw an improvement, rising to 50.5 from the previous reading of 43.8.
- US Services Prices Paid rose to the reading of 64.0 in January, from December’s reading of 56.7.
Technical Analysis: Australian Dollar hovers below the major resistance at 0.6550
The Australian Dollar trades around 0.6540 on Wednesday, slightly below the immediate resistance at the 0.6550 level. A breakout above this level could potentially trigger further upward movement for the AUD/USD pair, testing the 23.6% Fibonacci retracement level at 0.6563 and possibly reaching the 21-day Exponential Moving Average (EMA) at 0.6585. Conversely, if the pair faces downward pressure, key support is expected at the psychological level of 0.6500. Further support levels include the weekly low at 0.6468, followed by a major support level at 0.6450.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.06% | -0.16% | -0.10% | 0.06% | 0.13% | -0.07% | 0.16% | |
| EUR | 0.04% | -0.10% | -0.03% | 0.13% | 0.19% | -0.02% | 0.22% | |
| GBP | 0.16% | 0.10% | 0.06% | 0.23% | 0.30% | 0.09% | 0.34% | |
| CAD | 0.11% | 0.03% | -0.06% | 0.16% | 0.23% | 0.02% | 0.24% | |
| AUD | -0.07% | -0.13% | -0.23% | -0.17% | 0.06% | -0.15% | 0.10% | |
| JPY | -0.13% | -0.21% | -0.27% | -0.24% | -0.05% | -0.19% | 0.00% | |
| NZD | 0.07% | 0.00% | -0.10% | -0.03% | 0.12% | 0.21% | 0.22% | |
| CHF | -0.17% | -0.22% | -0.32% | -0.26% | -0.07% | -0.03% | -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
What is the Reserve Bank of Australia and how does it influence the Australian Dollar?
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.
How does inflation data impact the value of the Australian Dollar?
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.
How does economic data influence the value of the Australian 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.
What is Quantitative Easing (QE) and how does it affect the Australian Dollar?
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.
What is Quantitative tightening (QT) and how does it affect the Australian Dollar?
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.