- The Australian dollar weakened as Australia's trimming average fell from 3.5% to 3.2% annually.
- Australia's monthly consumer price index rose 2.3% year-on-year in November, the highest level since August.
- The dollar rose on Tuesday as the yield on the 10-year U.S. Treasury rose more than 1%.
The Australian dollar (AUD) remains weak against the US dollar (USD) for a second consecutive day of trading, with the AUD/USD pair continuing to fall despite better-than-expected monthly inflation figures released on Wednesday. . However, the trimmed average, which is closely watched as a measure of core inflation, fell from 3.5% to 3.2% annually, closer to the Reserve Bank of Australia's (RBA) target range of 2% to 3%. Traders are currently pricing in a 55% chance that the RBA will cut the cash rate by 25 basis points to 4.35% in February, with a full quarter point cut expected by April. .
Australia's monthly consumer price index (CPI) rose 2.3% year-on-year in November, beating market expectations of 2.2% and up from a 2.1% rise in the previous two months. This is the highest level since August. However, this figure has remained within the RBA's target range of 2% to 3% for the fourth consecutive month, due in part to the continued impact of the Energy Bill Relief Fund rebate.
The number of new construction projects approved in Australia in November 2024 fell 3.6% from the previous month to 14,998 units, falling short of market expectations for a 1.0% decline, the Australian Bureau of Statistics announced on Tuesday. This decline was the first decline in three months, following an upwardly revised 5.2% increase in October.
The People's Bank of China (PBoC) is working with national planning authorities to strengthen the country's economy. PBOC official Peng Lifeng announced that the PBOC will support the expansion of financing based on the trade-in initiative.
Australian dollar falls due to hawkish change in Fed's interest rate trajectory
- The US Dollar Index (DXY), which measures the performance of the US dollar (USD) against six major currencies, holds a position above 108.50 at the time of writing.
- The dollar rose as the yield on the 10-year U.S. Treasury rose more than 1% earlier in the day and is currently at 4.67%. This spike is a stark reminder of the shift in investor sentiment regarding the Federal Reserve's interest rate trajectory.
- US ISM Services PMI rose from 52.1 to 54.1 in November, beating market expectations of 53.3. The price paid index, which reflects inflation, rose significantly from 58.2 to 64.4, while the employment index fell slightly from 51.5 to 51.4.
- The US ISM Manufacturing PMI in December was 49.3, an improvement from 48.4 in November. This figure exceeded market expectations of 48.4.
- Atlanta Fed President Rafael Bostic said Tuesday that Fed officials should be cautious in their policy decisions because of uneven progress in curbing inflation, according to Bloomberg. Governor Bostic emphasized the need to lean toward keeping interest rates high to ensure the achievement of price stability targets.
- Richmond Fed President Thomas Barkin stressed on Friday that benchmark interest rates should remain subdued until there is greater confidence that inflation will return to the 2% target.
- Federal Reserve President Adriana Kugler and San Francisco Federal Reserve President Mary Daley highlighted the difficult balancing act facing U.S. central bankers as they seek to slow the pace of monetary easing this year.
- Traders are wary of President-elect Trump's economic policies, worried that tariffs could raise the cost of living. These concerns were further exacerbated by the Federal Open Market Committee's (FOMC) recent outlook, which suggested fewer interest rate cuts in 2025, reflecting caution against a backdrop of persistent inflationary pressures.
Technical analysis: Australian dollar falls below 9-day EMA and heads towards 0.6200
AUD/USD was trading around 0.6210 on Wednesday, still confined within a descending channel on the daily chart, maintaining a bearish outlook. The 14-day Relative Strength Index (RSI) has retreated towards the 30 level, suggesting possible strengthening of bearish momentum.
On the downside, the AUD/USD pair is likely to remain at the lower end of the descending channel, near the 0.5990 level.
The AUD/USD pair could test immediate resistance near the 9-day exponential moving average (EMA) at 0.6224, followed by the 14-day EMA at 0.6239. A further barrier appears near the top of the descending channel at the 0.6270 level.
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 weakest against the euro.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | -0.05% | 0.16% | -0.09% | 0.03% | 0.02% | -0.02% | |
| EUR | 0.09% | 0.05% | 0.26% | 0.00% | 0.12% | 0.12% | 0.07% | |
| GBP | 0.05% | -0.05% | 0.24% | -0.04% | 0.08% | 0.08% | 0.03% | |
| JPY | -0.16% | -0.26% | -0.24% | -0.26% | -0.14% | -0.15% | -0.19% | |
| CAD | 0.09% | -0.01% | 0.04% | 0.26% | 0.12% | 0.12% | 0.07% | |
| australian dollar | -0.03% | -0.12% | -0.08% | 0.14% | -0.12% | -0.00% | -0.05% | |
| new zealand dollar | -0.02% | -0.12% | -0.08% | 0.15% | -0.12% | 0.00% | -0.04% | |
| swiss franc | 0.02% | -0.07% | -0.03% | 0.19% | -0.07% | 0.05% | 0.04% |
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).
Frequently asked questions about inflation
Inflation measures the increase in the price of a representative basket of goods and services. Headline inflation is typically expressed as a percentage change on a month-over-month (MoM) and year-over-year (YoY) basis. Core inflation excludes more volatile components such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. Core inflation is the number that economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level (usually around 2%).
The Consumer Price Index (CPI) measures the change in the price of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-over-month (MoM) and year-over-year (YoY) basis. Core CPI is a central bank target that excludes volatile food and fuel inputs. If core CPI rises above 2%, interest rates typically rise, and vice versa when it falls below 2%. A rise in interest rates is good for the currency, so a rise in inflation usually results in a rise in the currency. The opposite is true when inflation falls.
It may seem counterintuitive, but when a country's inflation rate is high, the value of its currency increases, and vice versa when its inflation rate is low. This is because central banks typically raise interest rates to combat rising inflation, which increases global capital inflows from investors looking for favorable places to park their money.
Previously, gold was an asset investors looked to during times of high inflation because it maintained its value. Investors still often purchase gold as a safe haven asset during times of extreme market turbulence, but this is not the case in most cases. . When inflation rises, central banks raise interest rates to counteract it. Rising interest rates are negative for gold because they increase the opportunity cost of holding gold as an interest-bearing asset or in a cash savings account. Conversely, lower inflation tends to be positive for gold as it lowers interest rates, making the bright metal a more viable investment option.
