- Australian Dollar gains strength after the release of the mixed Chinese data.
- Australian currency retraces its recent losses on risk-on mood.
- Chinese CPI YoY fell by 0.3% and the monthly figure eased to 0.1%.
- Chinese Trade Balance USD increased to $75.34B in December. While, the yearly Imports CNY rose by 1.6%.
- Upbeat US CPI contributed support to underpinning the US Dollar.
The Australian Dollar (AUD) made a modest upward move, nearing the psychological level at 0.6700 on Friday following a retracement after registering losses in the previous session. The AUD/USD pair is getting support for its upward movement as market speculation remains elevated regarding potential rate cuts by the US Federal Reserve (Fed) in March and May. However, the pair experienced a downward shift following the release of better-than-expected inflation data from the United States (US).
Australia's Monthly Consumer Price Index for October and November indicates a marginal decrease, suggesting that the headline inflation for Q4 2023 will likely fall below the Reserve Bank of Australia's (RBA) annual forecast of 4.5%. The Australian Bureau of Statistics (ABS) data on job vacancies, showing a decline for six consecutive quarters, aligns with the easing pressures in the labor market. These findings imply that there may be no further interest rate hikes from the RBA in February.
Australia’s data also showed the increase in November's Retail Sales and the widening of December's Trade Surplus present contrasting signals. These positive economic indicators could influence the RBA to refrain from implementing any monetary policy easing despite the subdued inflation data.
Chinese Consumer Price Index (YoY) exhibited a decrease of 0.3% in December, contrary to the anticipated 0.4% decline. Additionally, the monthly Consumer Price Index showed a milder easing at 0.1%, compared to the market expectation of 0.2%. The yearly Producer Price Index recorded a fall of 2.7%, slightly exceeding the expected decline of 2.6%.
Chinese Trade Balance in USD rose to $75.34B, up from the previous $68.39B, surpassing the expected $74.75B. The Exports (YoY) figure exhibited a growth of 2.3%, exceeding the anticipated 1.7%. Concurrently, the yearly Imports in CNY increased by 1.6%, compared to the previous 0.6%. These economic indicators suggest a potential absence of policy tightening from the People's Bank of China (PBoC) and indicate improved economic activities. These factors, coupled with the close business relations between China and Australia, are favorable for supporting the Australian Dollar (AUD).
The US Dollar Index (DXY) maintains its position to build on recent gains after positive US inflation data was released on Thursday. Despite a slight setback in the previous session due to a decline in US Treasury yields, the US Dollar (USD) is poised for potential advancements on Friday as US yields show signs of improvement.
US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) surged to 3.4% YoY in December, exceeding both November's 3.1% and the anticipated market figure of 3.2%. Additionally, the monthly CPI growth for December showed a 0.3% increase, surpassing the market analysts' estimated projection of 0.2%. The annual Core CPI stood at 3.9%, a slight decrease from November's 4.0%, while the monthly figure remained steady at 0.3%, in line with expectations.
Traders anticipate the release of the US Producer Price Index (PPI) data for December, seeking additional insights into the economic landscape of the United States. In addition to the PPI data, the market will be attentive to a speech by Federal Reserve member Neel Kashkari later in the North American session, as it could provide further context and influence on market sentiment.
Daily Digest Market Movers: Australian Dollar experiences gains on risk-on mood
- Australia's trade surplus increased to 11,437M MoM in December, surpassing the market expectation of 7,500M and exceeding the previous reading of 7,129M.
- Australian Monthly Consumer Price Index (YoY) for November showed a slight reduction to 4.3%, falling slightly short of the market expectation of 4.4% from the previous figure of 4.9%.
- Chinese Defense Ministry has urged the United States to cease providing support to provocations by certain countries. China is calling on the US to adhere to the "One China Principle" and to halt the arming of Taiwan. Furthermore, the ministry is urging the US to strictly restrain front-line forces and refrain from hyping up security issues.
- New York Federal Reserve (Fed) President John Williams remarked on Wednesday that financial markets remain highly responsive to new data. Williams expressed confidence in the Fed's current position and suggested that it is now opportune to contemplate the future trajectory of interest rates.
- US Initial Jobless Claims for the week ending on January 5 eased at 202K against the market expectation of 210K and 203K prior.
Technical Analysis: Australian Dollar hovers around 0.6700 psychological level
The Australian Dollar trades near 0.6700 on Friday, positioned below the 14-day Exponential Moving Average (EMA) at 0.6721. A potential breakthrough above the EMA might propel the AUD/USD pair toward the key resistance at 0.6750. On the downside, crucial support lies at 0.6650, in conjunction with the weekly low at 0.6647, serving as significant psychological support. A breach below this level could lead the AUD/USD pair to explore the vicinity around the 38.2% Fibonacci retracement level, situated at 0.6637.
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 | 0.09% | 0.06% | -0.01% | 0.00% | 0.11% | 0.02% | 0.20% | |
| EUR | -0.08% | -0.02% | -0.11% | -0.08% | 0.01% | -0.07% | 0.13% | |
| GBP | -0.09% | 0.00% | -0.10% | -0.11% | 0.02% | -0.09% | 0.13% | |
| CAD | -0.01% | 0.07% | 0.05% | -0.04% | 0.12% | 0.01% | 0.14% | |
| AUD | -0.06% | 0.07% | 0.04% | -0.03% | 0.08% | 0.01% | 0.17% | |
| JPY | -0.11% | -0.03% | -0.07% | -0.13% | -0.07% | -0.13% | 0.09% | |
| NZD | -0.07% | 0.04% | 0.01% | -0.08% | -0.06% | 0.05% | 0.16% | |
| CHF | -0.19% | -0.13% | -0.12% | -0.19% | -0.15% | -0.08% | -0.13% |
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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