Australian Dollar remains stable due to improved risk sentiment ahead of US CPI
|- The AUD/USD pair holds ground following the remarks from the RBA’s Chief Economist Sarah Hunter.
- RBA’s Sarah Hunter noted that elevated rates are suppressing demand, which is expected to lead to a mild economic downturn.
- Donald Trump argued that the fees he intends to impose on imports would not lead to higher prices in the US.
The AUD/USD pair holds its position on Wednesday, following remarks from the Reserve Bank of Australia's (RBA) Assistant Governor for Economics, Sarah Hunter. However, the Australian Dollar's (AUD) losses may be limited as RBA Governor Michele Bullock maintained a hawkish outlook last week, emphasizing that it is too soon to consider rate cuts with elevated inflation.
RBA’s Assistant Governor Sarah Hunter noted that high interest rates are dampening demand, contributing to what is expected to be a mild economic downturn. Hunter also highlighted that the labor market remains tight compared to full employment levels, with employment growth likely to continue but at a slower pace than population growth, per Reuters.
Read more: RBA’s Hunter: Easing in labour market similar to past mild downturns
The AUD/USD pair encountered pressure as the US Dollar gained strength following a recent US labor market report, which cast doubt on the possibility of an aggressive interest rate cut by the Federal Reserve (Fed) at its upcoming September meeting.
The first US presidential debate between former President Donald Trump and Democratic nominee Kamala Harris in Pennsylvania began with a critical focus on the economy, inflation, and economic policies. Trump remarked, "We have a terrible economy. We have inflation that is probably the worst in history. This has been a disaster for people."
Daily Digest Market Movers: Australian Dollar consolidates amid rising risk-off mood
- According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting. The likelihood of a 50 bps rate cut has slightly decreased to 31.0%, down from 38.0% a week ago.
- Morgan Stanley's Chief China Economist, Robin Xing, stated that China is undoubtedly experiencing deflation, likely in the second stage of the process. Xing noted that Japan's experience suggests that the longer deflation persists, the greater the need for China to implement significant stimulus measures to overcome the debt-deflation challenge, per Business Standard.
- Australia's Westpac Consumer Confidence fell by 0.5% month-on-month in September, swinging from a 2.8% gain in August.
- China's Trade Balance reported a trade surplus of CNY 649.34 billion for August, increasing from the previous reading of CNY 601.90 billion. Meanwhile, China's Exports (CNY) increased by 8.4% year-on-year, following the previous rise of 6.5%.
- RBC Capital Markets now expects the Reserve Bank of Australia to implement a rate cut at its February 2025 meeting, earlier than its previous forecast of May 2025. Despite inflation in Australia remaining elevated above the RBA's target, slower economic growth is not considered a sufficient reason for a rate cut this year.
- The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) added 142,000 jobs in August, below the forecast of 160,000 but an improvement from July’s downwardly revised figure of 89,000. Meanwhile, the Unemployment Rate fell to 4.2%, as expected, down from 4.3% in the previous month.
- Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee remarked on Friday that Fed officials are starting to align with the broader market's sentiment that a policy rate adjustment by the US central bank is imminent, according to CNBC. FXStreet’s FedTracker, which uses a custom AI model to evaluate Fed officials' speeches on a dovish-to-hawkish scale from 0 to 10, rated Goolsbee's comments as dovish, assigning them a score of 3.2.
Technical Analysis: Australian Dollar hovers around 0.6650, followed by the lower boundary of descending channel
The AUD/USD pair trades near 0.6650 on Wednesday, with technical analysis of the daily chart indicating that the pair remains within a descending channel, signaling a bearish bias. The 14-day Relative Strength Index (RSI) is also below the 50 level, further confirming the ongoing bearish trend.
On the downside, the AUD/USD pair may target the lower boundary of the descending channel around 0.6620. A break below this level could reinforce the bearish outlook, potentially pushing the pair toward the throwback support zone around 0.6575.
On the upside, the AUD/USD pair may encounter resistance around the nine-day Exponential Moving Average (EMA) at 0.6693, followed by the upper boundary of the descending channel near 0.6740. A break above this upper boundary could reduce the bearish bias, potentially paving the way for the pair to retest its seven-month high of 0.6798, last reached on July 11.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.26% | -0.19% | -1.13% | -0.10% | -0.06% | 0.04% | -0.50% | |
| EUR | 0.26% | 0.07% | -0.87% | 0.18% | 0.25% | 0.30% | -0.23% | |
| GBP | 0.19% | -0.07% | -0.96% | 0.09% | 0.12% | 0.23% | -0.31% | |
| JPY | 1.13% | 0.87% | 0.96% | 1.05% | 1.07% | 1.15% | 0.62% | |
| CAD | 0.10% | -0.18% | -0.09% | -1.05% | 0.03% | 0.13% | -0.42% | |
| AUD | 0.06% | -0.25% | -0.12% | -1.07% | -0.03% | 0.04% | -0.43% | |
| NZD | -0.04% | -0.30% | -0.23% | -1.15% | -0.13% | -0.04% | -0.54% | |
| CHF | 0.50% | 0.23% | 0.31% | -0.62% | 0.42% | 0.43% | 0.54% |
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).
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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