- Australian Dollar declines amid recession fears
- Consumer and business sentiment in Australia continues to deteriorate, dragging down the Australian Dollar amid recession fears
- RBA maintains its hawkish stance with rate cuts unlikely in the near term despite global easing trends
- China's trade data shows mixed results with strong exports but weak imports, indicating ongoing economic challenges
The AUD/USD declined by 0.10% to 0.6660 in Tuesday's session, impacted by weak Australian data and a steady US Dollar.
Amidst uncertainty in the Australian economy and concerns over persistent inflation, financial markets anticipate a modest interest rate cut of only 0.25% in 2024. This is in line with the Reserve Bank of Australia's (RBA) firm stance on inflation, which has led to a relatively hawkish outlook for monetary policy.
Daily digest market movers: Australian Dollar declines as data raises recession fears
- Australian Dollar falls against US Dollar following weak consumer and business confidence data
- Westpac Consumer Sentiment Index dipped 0.5% in August, aligning with elevated concerns about the economic and employment outlook
- Business confidence and conditions deteriorated in August as per NAB's Business Confidence Index, reaching their lowest levels since November and January 2022, respectively
- Despite the Reserve Bank of Australia's firm stance against rate cuts due to inflationary concerns, analysts predict a shift toward an easing cycle with a rate cut anticipated by December
- On the data front, China's August exports surpassed expectations by growing 8.7% YoY, largely influenced by favorable base effects
- Import growth, however, was weaker than anticipated at 0.5%, indicating limited progress in boosting domestic demand
- All economic news in China is closely followed by Aussie traders as it is a close trading partner from Australia
AUD/USD technical outlook: Bearish momentum continues with bulls nowhere to be found
In the last several sessions, the AUD/USD pair has created lower highs and lower lows, suggesting that the overall outlook is bearish. Tuesday's decline of around 0.1% continues this trend and reinforces the bearish outlook. The Relative Strength Index (RSI) is currently at 42, which is in the negative area and suggests that selling pressure is rising.
The Moving Average Convergence Divergence (MACD) is also bearish with the histogram turning red and rising.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
![AUD/USD consolidates near multi-week low as traders await US CPI](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/AUDUSD/macro-of-aussie-20-note-8668638_XtraSmall.jpg)
AUD/USD consolidates near multi-week low as traders await US CPI
AUD/USD languishes near a multi-week low, around mid-0.6600s, during the Asian session on Wednesday as traders opt to wait on the sidelines ahead of the crucial US consumer inflation figures. In the meantime, the divergent Fed-RBA policy expectations assist spot prices to defend the 100-day SMA support amid subdued USD demand.
![USD/JPY recovers few pips from 142.00 mark, looks to US CPI for fresh impetus](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/USDJPY/japanese-yen-62890274_XtraSmall.jpg)
USD/JPY recovers few pips from 142.00 mark, looks to US CPI for fresh impetus
USD/JPY drifts lower for the second straight day and slides back closer to a one-month low. The divergent BoJ-Fed policy expectations turn out to be a key factor exerting some pressure. Traders seem reluctant to place aggressive bets ahead of the release of the key US CPI report.
![Gold sits near the weekly top; awaits US CPI before the next leg up](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/safe-investment-gm147322399-17568598_XtraSmall.jpg)
Gold sits near the weekly top; awaits US CPI before the next leg up
Gold price is consolidating its weekly gains as traders await the release of the US CPI figures for cues about the Fed's rate-cut path. Heading into the crucial data risk, the prospects for an imminent start of the Fed's policy-easing cycle, subdued USD demand and the cautious market mood should continue to act as a tailwind for the XAU/USD.
![Why Ethereum ETFs are underperforming amid rising ETH exchange reserve](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/Coins/Ethereum/ethereum_XtraSmall.jpg)
Why Ethereum ETFs are underperforming amid rising ETH exchange reserve
Ethereum is up 1% on Tuesday as ETH exchange-traded funds continue underperforming with another day of outflows. The weak flows in ETH ETFs may be due to their historically weak Q3 performance.
![Five Fundamentals for the week: Jittery markets fear the ECB, US inflation and more](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Prices/CPI/consumer-price-index-gm500080630-80587217_XtraSmall.jpg)
Five Fundamentals for the week: Jittery markets fear the ECB, US inflation and more Premium
Is there still a chance? Investors hope for a 50-bps rate cut from the Fed but also fear a global recession is underway. The world's three largest economies, the US, China, and the eurozone, are set to rock global markets.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.