- Australian Dollar drops as the RBA is not certain of further policy tightening.
- National Australia Bank forecasts another 25 basis points hike in February.
- PBOC Governor Pan Gongsheng said China is expected to achieve the 5% growth target set for the year.
The Australian Dollar (AUD) moves below a major level at 0.6450 on Wednesday, extending the losses for the third successive day following the recent dovish rate statement by the Reserve Bank of Australia (RBA). Additionally, the AUD/USD pair faces a challenge due to the rebound in US Dollar (USD).
Australia's central bank adopts a data-dependent approach, particularly as the Australian economy faces a slowdown. Consumer spending has remained subdued amid persistent inflation risks. Market participants seek more cues on whether forthcoming data will prompt additional rate hikes by the Reserve Bank of Australia (RBA).
The RBA raised the Official Cash Rate (OCR) from 4.10% to a 12-year high of 4.35% on Tuesday, aligning with widespread expectations. This move by the RBA appears to be influenced by recent Consumer Price Index (CPI) data, which disclosed a notable 5.6% increase in monthly inflation.
Economists at the National Australia Bank (NAB) anticipate another 25 basis points hike in February following the Q4 inflation data. Additionally, NAB believes that rate cuts are unlikely to commence until November 2024.
Pan Gongsheng, the Governor of the People's Bank of China (PBOC), expressed optimism in a statement on Wednesday, saying that China's economy is on a positive trajectory, and that it is anticipated to achieve the 5% growth target successfully. Additionally, the International Monetary Fund (IMF) has adjusted its outlook for China's Gross Domestic Product (GDP) growth, now projecting a 5.4% growth rate in 2023, up from the initial forecast of 5.0%, and 4.6% in 2024, surpassing the previous estimate of 4.2%. This development could offer support to the Australian Dollar (AUD), given Australia's position as China's largest trading partner.
As per the sources, China's State Council Head, Premier Li Qiang has instructed the local authorities of Guangdong Province to help arrange a rescue of Country Garden by an insurance group Ping An. On the contrary, a spokesperson for Ping An denied this report by Reuters.
The US Dollar Index (DXY) continues to gain grounds for the third successive day as US Treasury yields retrace the recent losses registered in the previous session, possibly influenced by improved risk sentiment. This change in sentiment might be linked to speculation regarding the possibility of the US Federal Reserve (Fed) concluding interest rate hikes, particularly in the wake of the downbeat Nonfarm Payrolls data released last Friday.
Daily Digest Market Movers: Australian Dollar loses ground on dovish RBA rate statement
- The RBA has resumed policy tightening, raising the Official Cash Rate (OCR) from 4.10% to 4.35% after maintaining the benchmark interest rate unchanged for four consecutive meetings.
- Australia’s TD Securities Inflation (YoY) fell to 5.1% in September from 5.7% prior.
- Australia’s Retail Sales grew 0.2% in the third quarter after contracting by 0.6% in the previous quarter.
- China's Trade Balance data for October showed a decrease in the surplus balance at $56.53B against the market expectations of an improvement to $81.95B from the previous readings of $77.71B. Exports (YoY) experienced a more significant decline of 6.4%, more than the expected decline of 3.1%.
- The US Bureau of Labor Statistics recently unveiled the Nonfarm Payrolls (NFP) data for October, disclosing a figure of 150K increase in jobs. This missed the expected 180K and marked a substantial drop from September's 297K.
- US Average Hourly Earnings (Month-on-Month) declined to 0.2%, deviating from the anticipated 0.3%. On a year-over-year basis, it came in at 4.1%, surpassing the 4.0% expectations.
- US ISM Services Purchasing Managers' Index (PMI) declined from the previous 53.6 to 51.8. Additionally, on Thursday, the US Department of Labor released the count of initial claims for unemployment benefits for the week ending October 27, showing an increase from 212,000 to 217,000.
Technical Analysis: Australian Dollar hovers below 0.6450 aligned with nine-day EMA
The Australian Dollar trades lower around 0.6430 on Wednesday. The nine-day Exponential Moving Average (EMA) at 0.6422 emerges as the key support followed by the psychological level at 0.6400. On the upside, the AUD/USD pair could face a challenge around the immediate barrier region at major support at 0.6450. A firm break could support the pair to reach the 38.2% Fibonacci retracement level at 0.6508, followed by September’s high at 0.6521.
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 | 0.21% | 0.27% | 0.06% | -0.01% | 0.24% | 0.11% | 0.20% | |
| EUR | -0.22% | 0.05% | -0.14% | -0.24% | 0.02% | -0.10% | -0.03% | |
| GBP | -0.27% | -0.05% | -0.19% | -0.28% | -0.03% | -0.16% | -0.07% | |
| CAD | -0.07% | 0.14% | 0.20% | -0.09% | 0.16% | 0.04% | 0.12% | |
| AUD | 0.01% | 0.23% | 0.28% | 0.09% | 0.25% | 0.13% | 0.21% | |
| JPY | -0.24% | 0.01% | 0.02% | -0.16% | -0.27% | -0.13% | -0.04% | |
| NZD | -0.13% | 0.10% | 0.16% | -0.06% | -0.12% | 0.12% | 0.07% | |
| CHF | -0.20% | 0.03% | 0.07% | -0.11% | -0.19% | 0.05% | -0.07% |
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.
(This story was corrected on November 8 at 07:22 GMT to say that the PBoC Governor is Pan Gongsheng, not Yi Gang.)
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