- The Australian dollar widened its losses after cutting intraday losses.
- The Australian currency strengthened as RBA’s Mr Bullock gave no rulings on future policy action.
- China’s CPI (YoY) fell by 0.8% against the expected 0.5% decline and the previous 0.3% decline.
- Fed members pledge to keep raising interest rates until inflation sustainably returns to its 2% target.
The Australian dollar (AUD) continues to fall after paring intraday gains on Thursday. However, despite the US Federal Reserve’s emphasis on its commitment to keeping interest rates high until inflation sustainably returns to its 2% target, the AUD/USD pair remains has boosted risk appetite. Additionally, improving conditions in Australia’s money market provided support for the Australian dollar (AUD), pushing the AUD/USD pair higher.
The Australian currency strengthened after Reserve Bank of Australia (RBA) Governor Michelle Bullock made hawkish comments following Tuesday’s interest rate decision. The RBA has chosen to keep the Official Cash Rate (OCR) unchanged at 4.35%.
Governor Bullock avoided making clear statements regarding future policy responses, neither confirming nor denying the issue. However, futures markets are currently pricing in the possibility of two rate cuts by the RBA this year, with the first expected to occur in September.
China’s consumer price index (CPI) rose 0.3% month-on-month in January, lower than the expected 0.4%. However, this was an improvement from the previous 0.1%. The annual CPI fell by 0.8%, higher than the expected 0.5% decline and the previous 0.3% decline. Meanwhile, the producer price index (year-on-year) fell by 2.5%, lower than the expected decline of 2.6%.
The US dollar index (DXY) appears to be on a downward trend for the third straight session, weighed down by the correction in US Treasury yields. However, Federal Reserve Chairman Jerome Powell ruled out a rate cut in March. Traders will focus on employment data Thursday, including the number of new U.S. jobless claims for the week ending Feb. 2.
In remarks Wednesday, Federal Reserve President Adriana Kugler expressed satisfaction with the significant progress made on inflation and expressed optimism that this progress will be sustained. Meanwhile, Boston Fed President Susan Collins, speaking at the Boston Economic Club, hinted that interest rates could be cut later this year if the economy matches expectations.
Daily Digest market movements: Australian dollar rises while US dollar stabilizes
- Australia’s AiG industry index for December was -27.3 compared to -22.4 previously.
- Australian retail sales (quarter-on-quarter) improved by 0.3% in the fourth quarter, compared to 0.2% in the previous quarter.
- Australia’s trade balance (month-on-month) in January decreased to 10.959 billion compared to December’s revised figure of 11.764 billion.
- Australia’s Judo Bank Purchasing Managers’ Index (PMI) was 49 in January, an improvement from the previous reading of 48.1. Services PMI improved, rising from 47.9 to 49.1.
- China’s Caixin Services PMI for January was 52.7, down from 52.9 in the previous survey.
- At the Atlanta Fed, wage growth was 5.0% in January, down from 5.2% in December. This is the lowest growth rate since December 2021 of 4.5%.
- U.S. MBA home loan applications for the week ending February 2 rose to 3.7% from a previous decline of 7.2%.
- The U.S. Census Bureau said the balance of trade in goods and services fell by 62.2 billion in December, as expected. The previous decrease was 61.9 billion.
- US 10-year bonds were sold at an average yield of 4.093% (previously 4.024%).
Technical analysis: Australian dollar remains below key barrier at 0.6550
The Australian dollar was trading around $0.6530 on Thursday, just below near-term resistance at $0.6550. A breakout of this level could prompt further upside for the AUD/USD pair, with potential targets including the 23.6% Fibonacci retracement level at 0.6563 and the 21-day exponential moving average (EMA) at 0.6579. On the downside, major support is expected at the psychological level of 0.6500. Additional support levels include weekly lows at 0.6468, followed by a major support level at 0.6450.
AUD/USD: daily chart
Australian dollar price today
The table below shows today’s percentage change in the Australian Dollar (AUD) against major listed currencies. The Australian dollar was the strongest against the Japanese yen.
| USD | EUR | GBP | CAD | australian dollar | JPY | new zealand dollar | Swiss franc | |
| USD | 0.00% | -0.01% | -0.02% | 0.14% | 0.41% | 0.02% | -0.14% | |
| EUR | -0.01% | -0.01% | -0.02% | 0.14% | 0.40% | 0.02% | -0.17% | |
| GBP | 0.00% | 0.01% | -0.03% | 0.13% | 0.40% | 0.03% | -0.14% | |
| CAD | 0.02% | 0.02% | 0.01% | 0.16% | 0.42% | 0.04% | -0.11% | |
| australian dollar | -0.12% | -0.14% | -0.13% | -0.15% | 0.29% | -0.12% | -0.27% | |
| JPY | -0.40% | -0.41% | -0.42% | -0.43% | -0.25% | -0.38% | -0.56% | |
| new zealand dollar | -0.03% | -0.02% | -0.03% | -0.04% | 0.12% | 0.38% | -0.19% | |
| Swiss franc | 0.12% | 0.13% | 0.12% | 0.11% | 0.28% | 0.52% | 0.15% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euro from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents EUR (base)/JPY (estimate).
RBA FAQ
The Reserve Bank of Australia (RBA) sets Australia’s interest rates and controls monetary policy. Decisions are made at the Board of Directors’ meetings held 11 times a year and at extraordinary emergency meetings as necessary. The RBA’s primary mission is to maintain price stability, or inflation between 2% and 3%, but it also “contributes to monetary stability, full employment, economic prosperity and the well-being of Australians”. The main means of achieving this is by raising or lowering interest rates. If interest rates are relatively high, the Australian dollar (AUD) will appreciate, and vice versa. Other RBA tools include quantitative easing and tightening.
Inflation has traditionally always been considered a negative factor for currencies, as it generally reduces the value of money, but in modern times, with the relaxation of cross-border capital controls, the opposite is actually true. Masu. Currently, with inflation rising slowly, central banks are likely to raise interest rates, which in turn has the effect of further capital inflows from global investors looking for a lucrative place to park their funds. . This increases the demand for the local currency (in the case of Australia, the Australian dollar).
Macroeconomic data assesses the health of an economy and can influence the value of a currency. Investors prefer to invest their capital in safe and growing economies than in unstable and shrinking economies. Increased capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators such as GDP, manufacturing and services PMI, employment and consumer sentiment surveys can influence the Australian dollar. A strong economy could prompt the Reserve Bank of Australia to raise interest rates, which could also support the Australian dollar.
Quantitative easing (QE) is a tool used in extreme situations where lower interest rates alone are not sufficient to restore credit flow to the economy. QE is a process in which the Reserve Bank of Australia (RBA) prints Australian dollars (AUD) for the purpose of purchasing assets (usually government and corporate bonds) from financial institutions, providing them with the liquidity they need. QE typically results in a weaker Australian dollar.
Quantitative tightening (QT) is the opposite of QE. This is done after quantitative easing, when economic recovery is underway and inflation begins to rise. In QE, the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide liquidity, whereas in QT, the RBA stops purchasing further assets and limits the maturities of bonds it already owns. Stop reinvesting the principal that has arrived. That would be positive (or bullish) for the Australian dollar.
