- The Australian dollar is holding firm on the back of new Chinese economic stimulus measures.
- Australia's monthly consumer price index rose 2.7% year-on-year in August, below the expected 2.8% increase and the previous 3.5% increase.
- The People's Bank of China's Gongsheng Bank said it would cut the reserve requirement rate by 50 basis points and reduce the seven-day repo rate to 1.5% from 1.7%.
The Australian dollar (AUD) pared intraday gains against the US dollar (USD) but held on to modest gains after the monthly consumer price index came in below expectations on Wednesday. The commodity-linked currency, however, gained support after its largest trading partner, China, announced new stimulus measures.
The Reserve Bank of Australia (RBA) kept its official central bank rate (OCR) unchanged at 4.35% on Tuesday, supporting the Australian dollar and strengthening the AUD/USD pair. In a press conference after the policy decision, RBA Governor Michelle Block confirmed that interest rates will remain on hold for the time being and made it clear that a rate hike was not explicitly considered during the meeting.
People's Bank of China (PBOC) Governor Pan Gongsheng announced on Tuesday that China will cut the reserve requirement ratio (RRR) by 50 basis points (bps). He also said the central bank will cut the seven-day repo rate to 1.5% from 1.7% and reduce down payments on second homes to 15% from 25%. Additionally, the PBOC cut the one-year medium-term lending facility (MLF) rate to 2.0% from 2.30% on Thursday. The last cut was from 2.50% in July 2024.
Daily Digest Market Trends: Australian dollar remains firm on RBA's hawkish stance
- In a recent note, JPMorgan advised investors to keep an eye on commodity and bond yields, given the market's positive outlook following China's stimulus package on Tuesday. The bank stressed that global economic growth is receiving renewed impetus from China, an element that has been missing in recent years. This development is seen as positive for the market, as it significantly reduces the risk of a recession. However, JPMorgan also warned of the potential risk of reinflation.
- Australia's monthly consumer price index rose 2.7% year-on-year in August, below the previous 3.5% increase and the forecast 2.8% increase.
- Federal Reserve Governor Michelle Bowman urged caution as the central bank moves ahead with rate cuts, saying on Tuesday that key inflation measures remain “uncomfortably above” its 2% target. Nevertheless, governors preferred a more traditional approach and argued for a 0.25% cut.
- The U.S. consumer confidence index fell to 98.7 in September from a revised 105.6 in August. The reading marked the biggest drop since August 2021.
- The ANZ-Roy Morgan Australian Consumer Sentiment Index rose 0.8 points this week to 84.9. Despite the increase, consumer confidence has remained below 85.0 for 86 consecutive weeks. Year-on-year, the index is up 8.5 points from 76.4.
- The S&P Global U.S. Composite Purchasing Managers' Index (PMI) showed growth slowing in September, falling to 54.4 from 54.6 in August. The manufacturing PMI unexpectedly fell to 47.0, indicating a contraction, while the services PMI expanded more than expected, reaching 55.4.
- “We're likely going to need to cut rates further over the next year. Interest rates need to come down significantly,” Chicago Fed President Austen Goolsby said. Additionally, Atlanta Fed President Raphael Bostic said on Monday that the U.S. economy is approaching normal levels of inflation and unemployment, and the central bank also needs to “normalize” monetary policy, according to Reuters.
- Australia's Judau Bank Composite PMI fell to 49.8 in September from 51.7 in August, signaling that business activity is shrinking as slowing growth in the services sector fails to offset a deep drop in manufacturing output. The services sector PMI fell to 50.6 in September from 52.5 the previous month, while the manufacturing PMI fell to 46.7 from 48.5 in August.
Technical reasons why: The Australian Dollar is rising to the upper limit of the ascending channel around 0.6900.
On Wednesday, the AUD/USD pair is trading near 0.6890. Technical analysis on the daily chart shows that the pair is trending up within an ascending channel pattern, suggesting a bullish trend. Moreover, the 14-day Relative Strength Index (RSI) is rising towards the 70 level, suggesting that although an upswing is in the cards, it may face consolidation soon.
On the resistance front, the AUD/USD pair is likely to test the upper limit of the ascending channel at 0.6930 levels, followed by the psychological level at 0.6950.
The AUD/USD pair is likely to find support at the lower limit of the ascending channel, which is coincident with the 9-day exponential moving average (EMA) at 0.6816. The next key support is at the psychological level of 0.6700. Below this level, the pair may drop further towards the six-week low at 0.6622.
AUD/USD: Daily Chart
Today's price of the Australian dollar
The table below shows the percentage movement of the Australian Dollar (AUD) against the major listed currencies today: The Australian Dollar was strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | Australian Dollar | NZD | Swiss Franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.08% | 0.10% | -0.05% | 0.00% | 0.04% | -0.17% | |
| EUR | 0.16% | 0.08% | 0.31% | 0.12% | 0.17% | 0.22% | -0.02% | |
| GBP | 0.08% | -0.08% | 0.19% | 0.05% | 0.08% | 0.11% | -0.09% | |
| JPY | -0.10% | -0.31% | -0.19% | -0.18% | -0.13% | -0.08% | -0.30% | |
| CAD | 0.05% | -0.12% | -0.05% | 0.18% | 0.05% | 0.10% | -0.12% | |
| Australian Dollar | -0.00% | -0.17% | -0.08% | 0.13% | -0.05% | 0.06% | -0.17% | |
| NZD | -0.04% | -0.22% | -0.11% | 0.08% | -0.10% | -0.06% | -0.23% | |
| Swiss Franc | 0.17% | 0.02% | 0.09% | 0.30% | 0.12% | 0.17% | 0.23% |
The heat map displays 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 the Australian Dollar from the left column and move it along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Economic indicators
Monthly Consumer Price Index (Year-on-Year)
The Consumer Price Index (CPI), released monthly, Australian Bureau of Statistics It measures the change in prices of fixed goods and services purchased by household consumers on a monthly basis. The index was developed to provide inflation data at a higher frequency than the quarterly CPI. The year-over-year reading compares the prices of the base month with the same month a year ago. A higher reading is considered bullish for the Australian Dollar (AUD) while a lower reading is considered bearish.
