Australian Dollar attempts to move into positive territory ahead of US PPI data
|- Australian Dollar depreciates as the US Dollar attempts to hold ground after recent losses.
- Australia employment data suggests that the RBA will avoid an interest rate hike in March.
- S&P/ASX 200 index improves following the overnight surge in Wall Street on market optimism.
- US Dollar holds ground over market sentiment suggesting that the Fed will postpone rate cuts in the upcoming meetings.
The Australian Dollar (AUD) attempts to move into positive territory after trimming intraday losses on Monday. However, the US Dollar (USD) gains ground on improved US Treasury yields. The AUD/USD pair received upward support after mixed economic data from the United States (US). Additionally, the Aussie Dollar received upward support as S&P/ASX 200 index improves following the overnight surge in Wall Street. Investors remain optimistic ahead of US Producer Price Index (PPI) data and Michigan Consumer Sentiment Index due on Friday.
Australian economy has shown modest growth, influenced by ongoing challenges in the labor market and subdued inflationary pressures. Recent employment data suggests that the Reserve Bank of Australia (RBA) is unlikely to raise interest rates further in the March meeting. Market expectations now indicate that the RBA will maintain its current rates until August, with a 25 basis points (bps) rate cut anticipated in September, compared to earlier projections for November.
The US Dollar Index (DXY) remains stable, buoyed by market sentiment suggesting that the US Federal Reserve (Fed) will postpone interest rate cuts in the upcoming March and May meetings. According to the FedWatch Tool, investors are now pricing in a 25 bps rate cut in June, with a likelihood of 53%. The US Dollar encountered difficulties following disappointing US Retail Sales data. However, the impact on the advance of the AUD/USD pair may have been mitigated by the decrease in Initial Jobless Claims.
Daily Digest Market Movers: Australian Dollar depreciates amid a stable US Dollar
- Australia’s seasonally adjusted Employment Change printed the reading of 0.5K for January, against the market expectation of 30K.
- Aussie Part-Time Employment came in at 10.6K as compared to the previous figure of 46.7K.
- Australian Participation Rate remained consistent at 66.8%, lower than the anticipated 66.9% in January.
- January’s Full-Time Employment improved to 11.1K from the previous decline of 109.4K.
- Australia’s Consumer Inflation Expectations data is unchanged at 4.5% for February.
- Reserve Bank of Australia Governor Michele Bullock addressed the Australian parliament's Senate Economics Legislation Committee, noting that the global economy has fared better than initially anticipated. She expressed previous concerns about potential hard landings and recessions but indicated that the economy is currently in a favorable position to bring inflation down within a reasonable timeframe.
- Federal Reserve Bank of Atlanta President Raphael W. Bostic anticipates further advancements in inflation but it could be bumpy. He notes that if inflation retreats faster, it could prompt a reassessment of his stance on the outlook for interest rates.
- US Retail Sales showed that consumer spending declined by 0.8% MoM in January. The market prediction was a decline of 0.1% against the previous increase of 0.4%.
- US Retail Sales Control Group decreased by 0.4% in January, swinging from the previous increase of 0.6%.
- US Initial Jobless Claims reported 212,000 unemployment claims for the week ending on February 9, against the market expectation of remaining consistent at 220,000.
- US January’s Industrial Production (MoM) is contracted by 0.1% against the expected improvement of 0.3% from a flat 0.0% prior.
Technical Analysis: Australian Dollar hovers above the resistance level of 0.6500
The Australian Dollar traded near 0.6510 on Friday, positioned above the immediate support at the psychological level of 0.6500. A break below this level could push the AUD/USD pair to navigate the major support at 0.6450 before the weekly low at 0.6442. Conversely, the AUD/USD pair could find the key resistance region around the 14-day Exponential Moving Average (EMA) located at 0.6525. A breakthrough above the latter could lead the pair to target the 23.6% Fibonacci retracement level at 0.6543 and the major resistance 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 weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.13% | 0.14% | 0.13% | 0.12% | 0.22% | 0.21% | 0.16% | |
| EUR | -0.13% | 0.00% | 0.00% | -0.01% | 0.09% | 0.08% | 0.03% | |
| GBP | -0.14% | -0.02% | -0.01% | -0.03% | 0.08% | 0.07% | 0.02% | |
| CAD | -0.13% | 0.00% | 0.01% | 0.00% | 0.09% | 0.07% | 0.03% | |
| AUD | -0.12% | 0.03% | 0.04% | 0.02% | 0.11% | 0.11% | 0.06% | |
| JPY | -0.22% | -0.10% | -0.08% | -0.09% | -0.15% | -0.01% | -0.05% | |
| NZD | -0.21% | -0.08% | -0.07% | -0.06% | -0.09% | 0.00% | -0.05% | |
| CHF | -0.16% | -0.02% | -0.01% | -0.02% | -0.04% | 0.06% | 0.06% |
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
What key factors drive the Australian Dollar?
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.
How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?
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.
How does the health of the Chinese Economy impact the Australian Dollar?
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.
How does the price of Iron Ore impact the Australian Dollar?
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.
How does the Trade Balance impact the Australian Dollar?
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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