- The Australian dollar stalled as the US dollar strengthened on strong US consumer price index (CPI) numbers.
- Australia’s ASX 200 index fell. Put pressure on the Australian dollar.
- The US dollar strengthened as US bond yields rose.
- Robust US CPI data dashed any chance the Fed would cut interest rates in March.
The Australian dollar (AUD) is trying to recover recent losses recorded in the previous session. The fall in AUD/USD was driven by strong US inflation data in January, dashing hopes that a March interest rate cut by the Federal Reserve was imminent.
Wall Street fell overnight on better-than-expected US inflation data, with mining and financial stocks selling, the S&P/Australian Stock Exchange 200 index falling to a three-week low, and the Australian dollar weakening. came under downward pressure.
The U.S. dollar index (DXY) has stabilized near three-month highs, supported by recent gains, while U.S. yields are hovering at multi-week highs across the yield curve. Market sentiment has changed dramatically, with expectations for next month’s stay unchanged rising to 93%, a stark contrast from last month. Investors are currently pricing in the possibility that the Fed will cut interest rates in June.
Daily Digest Market Movers: Australian dollar rises amid stable US dollar
- Speaking to a parliamentary committee, Australian Treasurer Stephen Kennedy said inflation in services was lagging behind inflation in goods. He said services inflation had likely peaked and was expected to fall over the next two years, and he saw no evidence of a wage-price spiral.
- Reserve Bank of Australia (RBA) Governor Michelle Bullock said the central bank could consider starting to cut interest rates even before inflation slows to 2.5%. But he cautioned that the RBA was still open to the possibility of further rate hikes.
- Marion Kohler, head of economic analysis at the RBA, highlighted the uncertainty surrounding the current inflation forecast for the Australian economy. But ultimately, he expects price increases to return to more moderate levels by 2025.
- China’s headline CPI fell by 0.8%, higher than the expected 0.5% decline and the previous 0.3% decline.
- The U.S. Consumer Price Index (CPI) rose 3.1% in January, higher than the 2.9% expected but lower than the previous 3.4%.
- The US inflation rate increased by 0.3% from the previous month, contrary to the previous forecast of maintaining it at 0.2%.
- US core CPI (year-over-year) held steady at 3.9%, compared to market expectations of a decline to 3.7% in January.
- US core inflation (month-over-month) rose 0.4% compared to the unchanged 0.3% expected in January.
Technical analysis: Australian dollar remains above key level 0.6450
The Australian dollar traded around $0.6450 on Wednesday, following the next psychological support level at $0.6400. A break below the latter could bring the AUD/USD pair closer to the key support level at 0.6350. On the upside, the main resistance appears at his psychological level of 0.6500. If this psychological barrier can be broken, the AUD/USD pair could reach the 14-day exponential moving average (EMA) of 0.6523, followed by the 23.6% Fibonacci retracement level at 0.6543 and the key level at 0.6550.
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 British pound.
| USD | EUR | GBP | CAD | australian dollar | JPY | new zealand dollar | Swiss franc | |
| USD | 0.03% | 0.25% | -0.10% | -0.36% | -0.20% | -0.41% | -0.10% | |
| EUR | -0.02% | 0.22% | -0.12% | -0.38% | -0.23% | -0.43% | -0.11% | |
| GBP | -0.24% | -0.22% | -0.34% | -0.59% | -0.44% | -0.65% | -0.33% | |
| CAD | 0.10% | 0.12% | 0.33% | -0.25% | -0.10% | -0.31% | 0.00% | |
| australian dollar | 0.35% | 0.38% | 0.58% | 0.26% | 0.15% | -0.05% | 0.26% | |
| JPY | 0.20% | 0.21% | 0.43% | 0.11% | -0.17% | -0.21% | 0.10% | |
| new zealand dollar | 0.41% | 0.42% | 0.66% | 0.31% | 0.06% | 0.21% | 0.34% | |
| Swiss franc | 0.10% | 0.12% | 0.33% | 0.00% | -0.25% | -0.10% | -0.30% |
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).
Australian Dollar Frequently Asked Questions
One of the most important factors for the Australian dollar (AUD) is the interest rate level set by the Reserve Bank of Australia (RBA). Australia is a resource-rich country, so another important factor is the price of its largest export, iron ore, which is Australia’s largest trading partner, as well as its inflation, growth rate and trade. The health of China’s economy is also a factor. balance. Market sentiment is also a factor, with investors taking on riskier assets (risk-on) or seeking safer assets (risk-off), with risk-on being positive for the Australian dollar.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates at which Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA’s main goal is to maintain a stable inflation rate of 2-3% by adjusting interest rates up and down. The Australian dollar is supported by relatively high interest rates compared to other major central banks, and conversely by relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a significant impact on the value of the Australian dollar (AUD). When China’s economy does well, China buys more raw materials, goods and services from Australia, increasing demand for the Australian dollar and boosting its value. The opposite is true if China’s economy is not growing as fast as expected. Therefore, positive or negative surprises in China’s growth data often directly impact the Australian dollar and its pairs.
Iron ore is Australia’s largest export, accounting for $118 billion annually, according to 2021 data, with China the main destination. Therefore, iron ore prices could be a driver for the Australian dollar. Generally, when the price of iron ore rises, the Australian dollar also rises because aggregate demand for the currency increases. The opposite is true if the price of iron ore falls. Higher iron ore prices tend to increase the likelihood of Australia’s trade balance being positive, which is also positive for the Australian dollar.
The balance of trade is the difference between what a country earns from exports and what it pays for imports, and is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought-after export, the country’s currency will be deducted from just the surplus demand generated from foreign buyers seeking to buy that export, compared to the amount spent on purchasing the import. value increases. Therefore, a positive net trade balance will cause the Australian dollar to appreciate, while a negative trade balance will have the opposite effect.
