- The Australian dollar recovers daily losses following the release of moderate employment data.
- The commodity-linked AUD faced challenges as reduced demand and a surplus of raw materials pressured market prices.
- The US Dollar experienced losses following the release of subdued Consumer Price Index data on Wednesday.
The Australian Dollar (AUD) is recovering its intraday losses following the release of subdued employment data on Thursday. However, the Australian Dollar faced challenges against the US Dollar (USD) due to falling copper and iron ore prices. The fall is exacerbated by worsening credit data from China, which, combined with reduced demand and a surplus of raw materials, has put further pressure on the markets. However,
The AUD/USD pair is under bearish pressure as investors assess the Reserve Bank of Australia’s (RBA) monetary policy stance. Despite elevated wage growth in the second quarter, which has kept the RBA’s outlook hawkish, RBA Governor Michele Bullock has ruled out any chance of rate cuts in the next six months. Bullock stressed that the Australian central bank remains vigilant over inflation risks and is prepared to raise rates further if needed.
The US dollar is facing challenges after Wednesday’s Consumer Price Index (CPI) data showed a moderate rise in the US annual inflation rate in July. Investors are likely debating how much the Federal Reserve (Fed) will cut rates in September. While traders are leaning towards a more modest 25 basis point reduction, with a 60% probability, a 50 basis point cut remains a possibility. According to CME FedWatch, there is a 36% chance of the larger cut occurring in September.
Daily Market Wrap: Australian Dollar Rises on Jobs Data
- Australian employment change was reported at 58,200 for July, beating the expectation of 20,000 and the previous reading of 52,300. However, the unemployment rate rose to 4.2%, beating the market expectation of holding steady at 4.1%. In addition, consumer inflation expectations for August rose to 4.5%, from the previous reading of 4.3%.
- Federal Reserve Bank of Chicago President Austan Goolsbee expressed growing concern Wednesday about the labor market rather than inflation, pointing to recent improvements in price pressures along with weak employment data. Goolsbee added that the magnitude of rate cuts will be determined by prevailing economic conditions, according to Bloomberg.
- The headline U.S. Consumer Price Index (CPI) rose 2.9% year-over-year in July, slightly below the 3% increase in June and below market expectations. The core CPI, which excludes food and energy, rose 3.2% year-over-year, a slight decline from the 3.3% increase in June but in line with market expectations.
- On Tuesday, Atlanta Fed President Raphael Bostic said recent economic data has increased his confidence that the Fed can meet its 2% inflation target. However, Bostic indicated that additional evidence is required before he would support a rate cut, according to Reuters.
- The US Producer Price Index (PPI) rose 2.2% year-on-year in July from 2.7% in June, missing the market expectation of 2.3%. Meanwhile, the core PPI rose 2.4% year-on-year in July, from the previous reading of 3.0%. The index fell short of an estimate of 2.7%. The core PPI was unchanged.
- Australia’s Westpac consumer confidence rose 2.8% in August, swinging from a 1.1% drop in July. Meanwhile, the Wage Price Index was flat with a 0.8% rise in the second quarter, slightly below the market expectation of a 0.9% increase.
- On Monday, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser attributed persistent inflation to weaker supply and a tight labor market. Hauser also noted that economic forecasts are shrouded in significant uncertainty.
- On Sunday, Federal Reserve Governor Michelle Bowman said she continues to see upside risks to inflation and continued strength in the labor market. This suggests the Fed may not be ready to cut rates at its next meeting in September, according to Bloomberg.
Technical Analysis: Australian Dollar falls near 0.6600
The Australian dollar is trading around 0.6590 on Thursday. The daily chart analysis indicates that the AUD/USD pair is testing the lower boundary of an ascending channel, suggesting a weakening of the bullish bias. Moreover, the 14-day Relative Strength Index (RSI) is positioned slightly below the 50 level, confirming the strengthening of a bearish momentum.
In terms of support, the lower boundary of the ascending channel around 0.6590 serves as an immediate support level for the AUD/USD pair. A break below this level could lead to a test of the nine-day exponential moving average (EMA) at 0.6580, followed by the retracement level at 0.6575. If the pair breaks below this support region, it could reinforce a bearish outlook, potentially leading it towards the retracement level at 0.6470.
On the upside, the AUD/USD pair could explore the area around the upper boundary of the ascending channel at the level of 0.6690. A break above this level could push the pair towards its six-month high of 0.6798, reached on July 11.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the Australian Dollar (AUD) exchange rate against major currencies today. Australian Dollar was the strongest currency against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | 0.02% | 0.12% | 0.02% | -0.11% | 0.23% | 0.03% | |
| EUR | -0.06% | -0.05% | 0.05% | -0.04% | -0.26% | -0.01% | -0.03% | |
| GBP | -0.02% | 0.05% | 0.11% | 0.01% | -0.20% | 0.05% | 0.12% | |
| JPY | -0.12% | -0.05% | -0.11% | -0.12% | -0.27% | -0.05% | -0.00% | |
| CAD | -0.02% | 0.04% | -0.01% | 0.12% | -0.14% | 0.04% | 0.11% | |
| AUD | 0.11% | 0.26% | 0.20% | 0.27% | 0.14% | 0.24% | 0.31% | |
| NZD | -0.23% | 0.01% | -0.05% | 0.05% | -0.04% | -0.24% | 0.07% | |
| CHF | -0.03% | 0.03% | -0.12% | 0.00% | -0.11% | -0.31% | -0.07% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the chart will represent the AUD (base)/USD (quote).
The RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages Australia’s monetary policy. Decisions are made by a Board of Governors at 11 meetings per year and at ad hoc emergency meetings as necessary. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2%-3%, but also to “…contribute to currency stability, full employment and the economic prosperity and well-being of the Australian people.” Its main tool for achieving this is to raise or lower interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other tools of the RBA are quantitative easing and monetary tightening.
Although inflation has traditionally always been considered a negative factor for currencies, as it reduces the value of money in general, the opposite has actually occurred in modern times with the relaxation of cross-border capital controls. Moderately high inflation now tends to lead central banks to raise their interest rates, which in turn has the effect of attracting more capital inflows from global investors looking for a lucrative place to store their money. This increases the demand for the local currency, which in Australia’s case is the Australian dollar.
Macroeconomic data gauges the health of an economy and can impact the value of its currency. Investors prefer to invest their capital in safe, growing economies rather than in weak, shrinking ones. Greater capital inflows boost aggregate demand and the value of the domestic currency. Classic indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can influence the AUD. A strong economy may encourage the Reserve Bank of Australia to raise interest rates, also supporting the AUD.
Quantitative Easing (QE) is a tool used in extreme situations where lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) in order to purchase assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is carried out after QE, when the economic recovery is underway and inflation is starting to rise. While in QE the Reserve Bank of Australia (RBA) buys government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets and stops reinvesting the maturing principal of the bonds it already owns. This would be positive (or bullish) for the Australian dollar.
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.
