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The Australian dollar is gaining on expectations that the RBA will delay rate cuts.

  • Australian Dollar Gains Ground on RBA-Dominic Sentiment
  • Australian consumer inflation expectations for July came in at 4.3%, slightly lower than the 4.4% in June.
  • US Dollar falls on lower Treasury yields ahead of June Consumer Price Index data.

The Australian Dollar (AUD) is holding onto gains on Thursday following the release of the Melbourne Institute’s soft Consumer Inflation Expectations for July, which presents consumers’ expectations of inflation over the next 12 months.

The AUD/USD pair is supported by rising expectations that the Reserve Bank of Australia (RBA) may delay the global rate-cutting cycle or possibly raise interest rates again. Recent data showed a decline in Australian consumer confidence in July, contrasted by an increase in business sentiment, reaching a 17-month high in June.

The US Dollar (USD) is losing ground, potentially influenced by lower US Treasury yields. Traders are keeping an eye on the upcoming US Consumer Price Index (CPI) data for June, due out on Thursday, for further insight into the Federal Reserve’s (Fed) monetary policy stance.

Market forecasts generally predict that the annualized US core CPI for the year ending June will remain stable at 3.4%. Meanwhile, headline CPI inflation is expected to rise 0.1% month-on-month in June, compared with the previous flat reading of 0.0%.

Daily Market Wrap: Australian Dollar Gains on RBA’s Bold Side

  • Australian consumer inflation expectations for July were 4.3%, slightly lower than the previous reading of 4.4%.
  • Federal Reserve Board Governor Lisa Cook said on Wednesday, “My baseline forecast… is that inflation will continue to move toward target over time, without a significant increase in unemployment,” according to Reuters.
  • On Wednesday, Fed Chairman Jerome Powell stressed the need to closely monitor the labor market, noting that it has deteriorated significantly. In addition, Powell expressed confidence in the downward movement of inflation.
  • The Consumer Price Index (CPI) in China, a close trading partner of Australia, rose at an annual rate of 0.2% in June, down from a 0.3% increase in May. The market had forecast a 0.4% increase for the period. On a monthly basis, Chinese CPI inflation declined by 0.2% in June, compared with a 0.1% decline in May, which was below the expected 0.1% decline.
  • On Tuesday, Fed Chair Jerome Powell answered questions before the Senate Banking Committee on the first day of his testimony before Congress. Powell stated, “More good data would strengthen our confidence in inflation.” He emphasized that “a policy rate cut is inappropriate until the Fed gains greater confidence that inflation is sustainably headed toward 2%.” He also noted that “first quarter data did not support the increased confidence in the path of inflation that the Fed needs to cut rates.”
  • On Tuesday, Westpac’s Australian consumer confidence fell 1.1% in July, reversing the 1.7% rise seen in June. This marks the fifth decline in 2024, driven by continued concerns about high inflation, elevated interest rates and a sluggish economy.

Technical Analysis: Australian Dollar Holds Its Position Around 0.6750

The Australian dollar is trading around 0.6750 on Thursday. The daily chart analysis shows that the AUD/USD pair is consolidating within an ascending channel, which indicates a bullish bias. Moreover, the 14-day Relative Strength Index (RSI) is holding above the 50 level, confirming the bullish momentum.

The AUD/USD pair could test the upper boundary of the ascending channel at around 0.6785. If it breaks this level, the pair could aim for the psychological level of 0.6800.

On the downside, the AUD/USD pair could find support around the lower boundary of the ascending channel at 0.6675, with additional support near the 50-day exponential moving average (EMA) at 0.6646. A break below this level could push the pair towards the retracement support around 0.6590.

AUD/USD: Daily Chart

Australian Dollar PRICE Today

The table below shows the Australian Dollar (AUD) exchange rate against major currencies today. The Australian Dollar was the strongest currency against the Canadian Dollar.

USD -0.03% -0.03% -0.03% 0.03% -0.05% -0.08% -0.07%
EUR 0.03% 0.01% 0.02% 0.06% -0.00% -0.03% -0.03%
GBP 0.03% -0.01% -0.02% 0.05% -0.02% -0.05% -0.02%
JPY 0.03% -0.02% 0.02% 0.04% -0.02% -0.09% -0.03%
CAD -0.03% -0.06% -0.05% -0.04% -0.09% -0.10% -0.08%
AUD 0.05% 0.00% 0.02% 0.02% 0.09% -0.04% -0.01%
NZD 0.08% 0.03% 0.05% 0.09% 0.10% 0.04% 0.03%
CHF 0.07% 0.03% 0.02% 0.03% 0.08% 0.00% -0.03%

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 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

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