- The Australian dollar has fallen due to economic instability in China.
- This week's ANZ Roy Morgan Consumer Confidence Index remained unchanged at 83.4.
- The US dollar is being supported by the fading possibility of further bumper rate cuts by the Federal Reserve.
The Australian dollar (AUD) remained weak against the US dollar (USD) on Tuesday, weighed down by weak trade balance figures for Australia's largest trading partner China released on Monday. Additionally, China's fiscal stimulus announced over the weekend failed to boost the Australian dollar as investors remained uncertain about its size.
Australia's weekly consumer confidence survey showed little movement, with the ANZ Roy Morgan Consumer Confidence Index remaining flat at 83.4 this week. Despite no change in the numbers, the long-term trend shows that consumer confidence has remained below the record 85.0 mark for 89 consecutive weeks. The current reading is 1.3 points higher than the 2024 weekly average of 82.1 points.
The US dollar (USD) is gaining support as expectations grow that the US Federal Reserve will avoid aggressive interest rate cuts. The market is currently pricing in an 83.6% chance of a 25 basis point rate cut in November, with a larger 50 basis point cut not expected, according to the CME FedWatch tool.
Daily Digest Market drivers: Australian dollar remains weak due to China's economic crisis
- 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 robust 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.
- The Australian dollar may have come under downward pressure from a detailed Commonwealth Bank of Australia note setting out expectations that the Reserve Bank of Australia (RBA) will cut interest rates by 25 basis points by the end of 2024. The report suggests a stronger disinflationary trend. Outperforming the RBA's expectations is essential for the Board to consider easing policy later this year.
- The risk-sensitive AUD/USD pair may have come under downward pressure due to escalating tensions in the Middle East, which has raised concerns of a broader regional conflict. At least four Israeli soldiers were killed and more than 60 injured in a drone attack in north-central Israel on Sunday, according to CNN.
- The Chinese military began training in the Taiwan Strait and around Taiwan on Monday. A US State Department spokesperson expressed serious concerns about the military actions of the People's Liberation Army (PLA). In response, Taiwan's Ministry of Defense stated, “We have no intention of escalating the conflict with our response.''
- China's National Bureau of Statistics reported that the country's monthly consumer price index (CPI) was flat at 0% in September, slowing from a 0.4% rise in August. The annual inflation rate rose 0.4%, falling short of the expected 0.6%. In addition, the Producer Price Index (PPI) decreased by 2.8% year-on-year, which was significantly lower than the previous 1.8% decline and exceeded the expected 2.5% decline.
- The National People's Congress on Saturday expressed an optimistic outlook after receiving a briefing from China's Ministry of Finance. The Ministry of Finance highlighted key priorities focused on stabilizing the real estate market and addressing local government debt issues. The ministry indicated it would issue special bonds to support both bank recapitalization and efforts to stabilize the real estate sector.
- Chicago Fed President Austan Goolsby praised progress on inflation and the labor market to Bloomberg. Goolsby noted that despite the strong September jobs report, there are no signs the economy is overheating.
- The Reserve Bank of Australia last week released minutes from its September monetary policy meeting, indicating that board members considered potential scenarios for both future interest rate cuts and hikes. Discussions suggested that achieving the Board's objectives may require future financial conditions to be either more or less stringent than current levels.
Technical analysis: Australian dollar remains below 0.6750 in descending channel
AUD/USD was trading around 0.6730 on Tuesday. Technical analysis on the daily chart shows that the pair is testing the upper bound of a descending channel pattern. A successful breakout above this level could signal a change in momentum from bearish to bullish. However, the 14-day Relative Strength Index (RSI) remains below 50, indicating that bearish momentum remains.
Suppose the AUD/USD pair breaks out of the descending channel. In that case, the first resistance could be encountered near the 0.6758 level of the 9-day exponential moving average (EMA), followed by a key psychological resistance at 0.6800.
On the downside, the AUD/USD pair could target the lower end of the descending channel around the 0.6630 level, with the eight-week low of 0.6622, last recorded on September 11, potentially providing further support.
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 Japanese yen.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | 0.11% | -0.10% | 0.10% | 0.26% | 0.27% | -0.01% | |
| EUR | -0.15% | -0.04% | -0.26% | -0.09% | 0.11% | 0.10% | -0.17% | |
| GBP | -0.11% | 0.04% | -0.20% | -0.01% | 0.16% | 0.14% | -0.06% | |
| JPY | 0.10% | 0.26% | 0.20% | 0.20% | 0.36% | 0.35% | 0.13% | |
| CAD | -0.10% | 0.09% | 0.01% | -0.20% | 0.16% | 0.17% | -0.05% | |
| australian dollar | -0.26% | -0.11% | -0.16% | -0.36% | -0.16% | -0.00% | -0.22% | |
| new zealand dollar | -0.27% | -0.10% | -0.14% | -0.35% | -0.17% | 0.00% | -0.21% | |
| swiss franc | 0.01% | 0.17% | 0.06% | -0.13% | 0.05% | 0.22% | 0.21% |
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, 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.
