- The Australian dollar has strengthened as strong employment data makes it less likely that the Reserve Bank of Australia will cut interest rates in 2024.
- In the third quarter, China's gross domestic product reported growth of 4.6% year-on-year (previously measured at 4.7%).
- Strong US retail sales data supported the US dollar and raised the possibility of the Fed cutting nominal interest rates.
On Friday, the Australian dollar (AUD) rose for the second consecutive day against the US dollar (USD). The AUD/USD rally was largely driven by better-than-expected domestic employment data released on Thursday, which prompted traders to back off on expectations for a Reserve Bank of Australia (RBA) interest rate cut later this year. Ta.
The Australian dollar may also have been supported by the confirmation that China, its largest trading partner, would cut interest rates. Industrial and Commercial Bank of China, Bank of Communications and China Merchants Bank announced interest rate cuts of 25 basis points (bp). Lower interest rates could stimulate domestic economic activity and increase demand for Australian exports to China.
China's gross domestic product (GDP) growth rate in the third quarter of 2024 will be an annualized rate of 4.6%, slightly slower than the 4.7% growth rate in the second quarter, but below market expectations of 4.5%. exceeded. On a quarterly basis, GDP grew by 0.9% in the third quarter of 2024, up from 0.7% in the previous quarter, but below the expected 1.0%. China's retail sales rose 3.2% year-on-year in September, beating both the expected 2.5% increase and the previous 2.1% increase.
The US dollar (USD) has been steadily declining as US bond yields have fallen. However, the dollar hit a two-month high of $103.87 on Thursday, supported by a strong US retail sales report, raising hopes that the Federal Reserve could cut nominal interest rates. It has increased. According to the CME FedWatch tool, there is a 90.8% chance of a 25 basis point rate cut in November and a 74.0% chance of another rate cut in December.
Daily Digest Market Trends: Robust labor data restrains RBA interest rate cuts, Australian dollar rises
- On Friday, People's Bank of China Governor Pan Gongsheng said that the People's Bank of China had “issued specific guidelines on share buybacks and refinancing to increase holdings, and that credit funds have illegally flowed into the stock market.” “I emphasized that this should not happen,” he said.
- National Australia Bank revised its outlook for the Reserve Bank of Australia (RBA) in a note this week. “We have brought forward our expectations for the timing of rate cuts and now expect the first rate cut to be in February 2025 rather than May,” the bank said. They expect rate cuts to continue at a moderate pace, with rates expected to fall to 3.10% by early 2026.
- U.S. retail sales in September rose 0.4% from the previous month, exceeding both the 0.1% increase recorded in August and the market estimate of 0.3%. Additionally, the number of new U.S. unemployment claims fell by 19,000 for the week ending October 11, the largest decline in three months. The total number of applications was 241,000, significantly lower than the expected 260,000.
- Australia's seasonally adjusted employment increase in September was 64,100, bringing total employment to a record high of 14.52 million. This followed the previous month's revised increase of 42,600, and was significantly higher than the market estimate of an increase of 25,000. Meanwhile, the unemployment rate in September was stable at 4.1%, in line with August's revised figure and lower than the expected 4.2%.
- On Wednesday, Reserve Bank of Australia (RBA) Deputy Governor Sarah Hunter reiterated the central bank's commitment to containing inflation, saying that while inflation expectations remain firmly held, ongoing price pressures remain a significant challenge. He emphasized that he was presenting it.
- On Tuesday, Atlanta Fed President Rafael Bostic said he expected only one more 25 basis point rate cut this year, as reflected in the outlook at last month's U.S. central bank meeting. . “The median forecast was 50 basis points above the 50 basis points already in place in September. My forecast was for another 25 basis points,” he said, according to Reuters.
- Minneapolis Federal Reserve President Neel Kashkari reassured markets late Monday by reaffirming the Fed's data-dependent approach. According to Reuters, Kashkari cited the continued easing of inflationary pressures and a solid labor market, despite recent increases in overall unemployment, and cited the Fed's well-publicized concerns about the strength of the U.S. economy. He reiterated the views of policymakers.
Technical analysis: Australian dollar breaks above 0.6700, descending channel
The AUD/USD pair was trading around 0.6710 on Friday. Technical analysis on the daily chart shows that the pair has successfully broken out of the descending channel pattern, indicating a possible transition from a bearish trend to a bullish trend. However, the 14-day Relative Strength Index (RSI) remains below 50, suggesting bearish sentiment remains prevalent.
On the upside, the AUD/USD pair may test the 9-day exponential moving average (EMA) at 0.6724, followed by the key psychological resistance at 0.6800.
Regarding support, the pair may attempt to re-enter the descending channel. A successful pullback could strengthen the bearish outlook, with the pair targeting an eight-week low of 0.6622, last recorded on September 11, before potentially aiming for the lower end of the descending channel near 0.6580. be.
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 US dollar.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | -0.33% | -0.22% | -0.01% | -0.14% | -0.05% | -0.00% | |
| EUR | 0.10% | -0.21% | -0.13% | 0.08% | -0.07% | 0.06% | 0.10% | |
| GBP | 0.33% | 0.21% | 0.10% | 0.30% | 0.17% | 0.28% | 0.29% | |
| JPY | 0.22% | 0.13% | -0.10% | 0.22% | 0.08% | 0.16% | 0.20% | |
| CAD | 0.01% | -0.08% | -0.30% | -0.22% | -0.14% | -0.04% | -0.03% | |
| australian dollar | 0.14% | 0.07% | -0.17% | -0.08% | 0.14% | 0.09% | 0.10% | |
| new zealand dollar | 0.05% | -0.06% | -0.28% | -0.16% | 0.04% | -0.09% | 0.02% | |
| swiss franc | 0.00% | -0.10% | -0.29% | -0.20% | 0.03% | -0.10% | -0.02% |
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 Australian Dollars from the left column and move along the horizontal line to US Dollars, the percentage change displayed in the box represents AUD (Basic)/USD (Quote).
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, whether investors are taking on riskier assets (risk-on) or looking for 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 increases, the Australian dollar also appreciates 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 becoming 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.
