- Australian Dollar weakened as the US Dollar surged on solid Nonfarm Payrolls.
- Australia's Trade Balance reduced to 10,959M in January from 11,764M prior.
- Chinese Services PMI reduced to 52.7 in January from the previous reading of 52.9.
- RBA is expected to keep the cash rate steady at 4.35% at Tuesday’s meeting.
- US NFP added 353K jobs in January against the market consensus of 180K.
The Australian Dollar (AUD) trades in positive territory after recovering intraday losses on Monday. However, the AUD faced challenges due to the blockbuster job data from the United States (US), which has resulted in a sharp rise in the US Dollar (USD), weighing on the AUD/USD pair. Additionally, the benchmark S&P/ASX 200 Index retreats from last week's record high, with miners and energy sectors taking the brunt, putting additional pressure on the AUD.
Australian Bureau of Statistics released the Trade Balance for January on Monday. The monthly report showed a reduction, with the figure at 10,959M compared to the revised figure of 11,764M in December. Additionally, the 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.
Meanwhile, TD Securities Inflation (YoY) grew by 4.6%, against the previous growth of 5.2%. Furthermore, Chinese Caixin Services PMI reduced to 52.7 in January from the previous reading of 52.9.
The Reserve Bank of Australia (RBA) is set to announce its interest rate decision on Tuesday. In a Reuters Poll, analysts unanimously expect the RBA to keep the cash rate steady at 4.35%. Investors will closely observe RBA Governor Michele Bullock's speech on the monetary policy outlook for further insights into the central bank's stance.
The US Dollar Index (DXY) reaches an eight-week high, fueled by positive market sentiment as a March rate cut appears unlikely. This sentiment is based on a promising labor market report, where data from the US Bureau of Labor Statistics (BLS) on Friday showed that Nonfarm Payrolls added 353,000 jobs in January, surpassing the previous reading of 333,000 and exceeding the market consensus of 180,000. Additionally, Average Hourly Earnings (YoY) rose by 4.5%, surpassing the expected 4.1% and the previous 4.4% rise. Traders will further observe the ISM Services Employment Index, which is due to be released on Monday.
US Federal Reserve Chair Jerome Powell reiterated the expectation that the March meeting is likely too soon to have confidence in starting rate cuts. With the economy strong, the Fed intends to approach the timing of rate cuts carefully. Powell expressed that confidence is rising, but the central bank wants more assurance before taking the "crucial step" of initiating rate cuts.
Fed Chair Powell mentioned that they are making good progress on inflation and could potentially move sooner if they observed weakness in the labor market or if inflation were to convincingly decrease. He noted that more persistent inflation could lead to a later move.
Daily Digest Market Movers: Australian Dollar weakens after solid US labor data
- Australian TD Securities Inflation (MoM) grew by 0.3% in January, lower than the December’s rise of 1.0%.
- Australia’s ANZ Job Advertisements rose by 1.7% in January, exceeding the previous growth rate of 0.6%.
- Australian Bureau of Statistics showed a growth in monthly Imports in January rising at 4.8% against the previous reading of -8.4%. While Exports grew by 1.8% against the 0.6% prior.
- US Average Hourly Earnings (MoM) came in at 0.6% for January, exceeding the expected 0.3% and 0.4% reading from December.
- The US Unemployment Rate is unchanged at 3.7% in January against the market consensus of 3.8%.
- US Bureau of Labor Statistics showed that January’s Labor Force Participation Rate remained stable at 62.5%.
- Michigan Consumer Sentiment Index improved to the figure of 79 in January against the anticipated 78.9 and December’s figure of 78.8.
Technical Analysis: Australian Dollar surpasses the psychological barrier at 0.6500
The Australian Dollar trades around 0.6510 on Monday, situated below the major level at 0.6550. A break above this level could potentially support the AUD/USD pair to test the resistance zone around the 23.6% Fibonacci retracement at 0.6573, before reaching the 21-day Exponential Moving Average (EMA) at 0.6598. The latter is aligned with the psychological level at 0.6600. On the downside, the immediate support appears at the psychological level at 0.6500 following the major support at 0.6450 level. A break below the latter could push the AUD/USD pair to test the psychological support at 0.6400.
AUD/USD: Daily Chart
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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 | 0.05% | 0.08% | 0.04% | -0.15% | -0.08% | -0.23% | 0.14% | |
| EUR | -0.05% | 0.04% | 0.00% | -0.20% | -0.13% | -0.27% | 0.10% | |
| GBP | -0.08% | -0.03% | -0.04% | -0.24% | -0.17% | -0.31% | 0.05% | |
| CAD | -0.04% | -0.01% | 0.04% | -0.20% | -0.13% | -0.27% | 0.10% | |
| AUD | 0.15% | 0.20% | 0.24% | 0.19% | 0.06% | -0.07% | 0.29% | |
| JPY | 0.08% | 0.13% | 0.14% | 0.13% | -0.07% | -0.16% | 0.23% | |
| NZD | 0.22% | 0.27% | 0.31% | 0.26% | 0.07% | 0.14% | 0.36% | |
| CHF | -0.14% | -0.10% | -0.07% | -0.11% | -0.30% | -0.23% | -0.38% |
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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