- The Australian Dollar is trading lower while the US Dollar is trying to recover losses.
- Australian consumer sentiment fell 2.6% in November, down from previous growth of 2.9%.
- The Dollar could gain ground due to the recovery in US bond yields.
The Australian Dollar (AUD) is trading lower on Tuesday, while the US Dollar (USD) attempts to recoup recent losses thanks to the recovery in US Treasury yields.
Australia’s Westpac Consumer Confidence revealed on Tuesday that consumer sentiment fell substantially in November, which could undermine the Australian Dollar (AUD). Additionally, the Australian Dollar came under pressure after the Reserve Bank of Australia (RBA) was dovish at its latest meeting.
In its monetary policy statement last Friday, the RBA presented a difficult economic outlook, pointing to persistent inflation and the sluggishness of the Australian economy. The RBA has its sights set on realigning inflation with its target.
The Australian Dollar might have welcomed RBA Deputy Governor (Economy) Marion Kohler’s hawkish statement. Kohler stated that the decline in inflation is expected to be slower than initially anticipated. This is attributed to the persistently high level of domestic demand and strong labor and other cost pressures. Kohler stressed the need for more restrictive policy to address the challenges posed by high inflation.
The DXY Dollar Index struggles to break a two-day losing streak ahead of US inflation data due on Tuesday. Forecasts indicate that the Consumer Price Index (CPI) will rise at a slower pace in October. The forecast for the underlying year-on-year rate remains stable. If the data matches expectations, it could solidify the market’s belief that the Federal Reserve (Fed) has concluded its interest rate hikes.
Daily Market Summary: Australian Dollar Maintains Position After Rebounding from Last Week’s Low
- Australia’s Westpac consumer confidence fell 2.6% in November, swinging from previous growth of 2.9%.
- The RBA highlighted the challenges arising from persistent inflationary pressures and the sluggish national economy in its comprehensive policy statement last Friday.
- The RBA advice recognizes the financial difficulties of many households. Budgets are suffering. In a twist in economic dynamics, the central bank painted a mixed picture by raising its forecasts for both inflation and GDP growth.
- The RBA increased the Official Cash Rate (OCR) from 4.10% to 4.35%, its highest level in 12 years, in response to the latest monthly Consumer Price Index data for September, which indicated a notable increase of 5.6%, compared to the expected growth of 5.4%.
- In Australia, TD Securities inflation (year-on-year) fell to 5.1% in September, down from 5.7% previously.
- Economists at National Australia Bank (NAB) forecast another 25 basis point rise in February, following fourth quarter inflation data. Additionally, NAB believes rate cuts are unlikely to begin until November 2024.
- The next US-China presidential meeting is on the horizon, and US President Joe Biden aims to rebuild military connections with China. The long-awaited face-to-face between Biden and Chinese President Xi Jinping is scheduled for Wednesday during the Asia-Pacific Economic Cooperation Forum summit in San Francisco, marking their first in-person meeting in a year.
- China’s Consumer Price Index (CPI) recorded an annual decline of 0.2% in October, compared to the expected 0.1% decline. The monthly CPI fell by 0.1%, which contrasts with the previous growth of 0.2%. A weaker economic scenario in China casts a shadow on the Australian Dollar (AUD), given Australia’s heavy dependence on its largest trading partner.
- The Chairman of the Federal Reserve (Fed), Jerome Powell, surprised in his speech on Thursday, adopting a more hardline stance than expected. Powell expressed concern that current monetary policies may not be restrictive enough to push inflation back to the coveted 2.0% target.
- The monthly US budget report reported a deficit of $67 billion in October, compared to the $65 billion expected.
- Preliminary Michigan consumer sentiment data for November showed a drop in consumer morale. It fell to 60.4 from 63.8 the previous month.
Technical Analysis: Australian Dollar holds above 0.6350, followed by the 14-day EMA barrier
The Australian Dollar is trading lower near 0.6360 on Tuesday, with the 14-day EMA at 0.6389 as initial resistance. There is also a major barrier at the psychological level of 0.6400. If this level is broken, the AUD/USD pair could explore the 23.6% Fibonacci retracement zone at 0.6417. To the downside, the main support level at 0.6350 comes into play, followed by the three-week low at 0.6314.
AUD/USD daily chart
Quote of the Australian Dollar today
Below is the percentage change of the Australian Dollar (AUD) against major currencies today.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.08% | 0.12% | 0.18% | 0.04% | 0.25% | 0.12% | |
| EUR | -0.04% | 0.04% | 0.08% | 0.15% | 0.00% | 0.22% | 0.08% | |
| GBP | -0.08% | -0.04% | 0.04% | 0.11% | -0.04% | 0.16% | 0.05% | |
| CAD | -0.13% | -0.08% | -0.04% | 0.07% | -0.08% | 0.12% | 0.02% | |
| AUD | -0.18% | -0.15% | -0.11% | -0.07% | -0.15% | 0.07% | -0.06% | |
| JPY | -0.04% | 0.00% | 0.05% | 0.09% | 0.14% | 0.23% | 0.08% | |
| NZD | -0.24% | -0.21% | -0.16% | -0.11% | -0.04% | -0.21% | -0.11% | |
| CHF | -0.12% | -0.08% | -0.05% | 0.00% | 0.06% | -0.08% | 0.12% |
The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen in the left column, while the quote currency is chosen in the top row. For example, if you choose the euro in the left column and scroll down the horizontal line to the Japanese yen, the percentage change that appears in the box will represent EUR (base)/JPY (quote).
Australian Dollar FAQ
What factors determine the price of the Australian dollar?
One of the most important factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor is the price of its largest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as is inflation in Australia, its growth rate and the Balance of Trade. Market sentiment, that is, whether investors bet on riskier assets (risk-on) or seek safe havens (risk-off), is also a factor, with the risk-on being positive for the AUD.
How do decisions by the Reserve Bank of Australia affect the Australian dollar?
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The RBA’s main objective is to maintain a stable inflation rate of 2%-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low ones. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being negative for the AUD and the latter being positive for the AUD.
How does the health of the Chinese economy influence the Australian dollar?
China is Australia’s largest trading partner, so the health of the Chinese economy greatly influences the value of the Australian Dollar (AUD). When the Chinese economy is doing well, it buys more raw materials, goods and services from Australia, which increases demand for the AUD and drives up its value. The opposite occurs when the Chinese economy does not grow as fast as expected. Therefore, positive or negative surprises in Chinese growth data usually have a direct impact on the Australian Dollar.
How does the price of iron ore influence the Australian Dollar?
Iron ore is Australia’s largest export, with $118 billion a year according to 2021 data, with China being its main destination. The iron ore price, therefore, may be a driver of the Australian dollar. Typically, if the price of iron ore rises, the AUD also rises as aggregate demand for the currency increases. The opposite occurs when the price of iron ore falls. Higher iron ore prices also tend to result in a higher likelihood of a positive trade balance for Australia, which is also positive for the AUD.
How does the trade balance influence the Australian dollar?
The trade balance, which is the difference between what a country earns from its exports and what it pays for its imports, is another factor that can influence the value of the Australian dollar. If Australia produces highly sought-after exports, its currency will gain value solely from the excess demand created by foreign buyers wanting to purchase its exports versus what it spends on purchasing imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the trade balance is negative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
