- The Australian dollar depreciated as China’s fiscal stimulus plan failed to boost market sentiment.
- The ANZ-Roy Morgan Consumer Confidence Index held steady at 83.4 this week.
- The US dollar receives support from the decreasing probability of further aggressive rate cuts by the Fed.
The Australian Dollar (AUD) remains subdued against the US Dollar (USD) on Tuesday, weighed down by weak trade balance data from China, Australia’s largest trading partner, released on Monday. Additionally, China’s fiscal stimulus plan, announced over the weekend, failed to boost the Australian dollar as investors were left uncertain about the size of the package.
Australia’s weekly Consumer Confidence survey showed little movement, with the ANZ-Roy Morgan Consumer Confidence Index holding steady at 83.4 this week. Despite the unchanged figure, the long-term trend shows that Consumer Confidence has been below the 85.0 mark for a record 89 consecutive weeks. The current reading is 1.3 points higher than the 2024 weekly average of 82.1.
The US Dollar (USD) gains support from rising expectations that the US Federal Reserve (Fed) will avoid aggressive interest rate cuts. According to the CME FedWatch tool, markets are currently pricing in an 83.6% probability of a 25 basis point rate cut in November, without anticipating a reduction greater than 50 basis points.
Daily Market Summary: Australian Dollar Remains Moderate on China Economic Woes
- Minneapolis Federal Reserve Bank President Neel Kashkari reassured markets Monday night by reaffirming the Fed’s data-dependent approach. Kashkari reiterated the familiar views of policymakers of the Fed on the strength of the US economy, pointing to continued easing inflationary pressures and a robust labor market, despite a recent rise in the overall unemployment rate, according to Reuters.
- The AUD could have received downward pressure from a detailed note from the Commonwealth Bank of Australia indicating expectations that the Reserve Bank of Australia (RBA) will implement a 25 basis point rate cut by the end of 2024. The report suggested that a stronger disinflationary trend than the RBA anticipates is essential for the Board to consider easing policy within this calendar year.
- The risk-sensitive AUD/USD pair could have received downward pressure due to escalating tensions in the Middle East that have raised concerns about a broader regional conflict. According to CNN, at least four Israeli soldiers were killed and more than 60 people were injured in a drone strike in north-central Israel on Sunday.
- China’s military began exercises in the Taiwan Strait and around Taiwan on Monday. A spokesperson for the US State Department expressed serious concern about the military actions of the People’s Liberation Army (PLA). In response, Taiwan’s Ministry of Defense stated: “We will not escalate the conflict in our response.”
- China’s National Bureau of Statistics reported that the country’s monthly Consumer Price Index (CPI) remained unchanged at 0% in September, down from a 0.4% increase in August. The annual inflation rate increased by 0.4%, below the anticipated 0.6%. Additionally, the Producer Price Index (PPI) decreased 2.8% year-on-year, a larger drop than the previous 1.8% decline and exceeding expectations for a 2.5% decline.
- On Saturday, the National People’s Congress expressed an optimistic outlook following a briefing by China’s Ministry of Finance (MoF). The MoF emphasized key priorities focused on stabilizing the property market and addressing local government debt issues. The ministry indicated that special bonds will be issued to support both bank recapitalization and efforts to stabilize the real estate sector.
- Chicago Fed President Austan Goolsbee spoke with Bloomberg, praising progress on inflation and the labor market. Goolsbee noted that despite September’s positive jobs report, there is no sign of the economy overheating.
- Last week, the Reserve Bank of Australia released minutes from its September policy meeting, suggesting board members examined possible scenarios for both lowering and raising interest rates in the future. The discussion indicated that future financial conditions may need to be tighter or more flexible than current levels to meet the Board’s objectives.
Technical Analysis: Australian Dollar remains below 0.6750 within descending channel
The AUD/USD pair is around 0.6730 on Tuesday. Technical analysis of the daily chart shows that the pair is testing the upper boundary of a descending channel pattern. A successful break above this level could signal a shift in momentum from bearish to bullish. However, the 14-day Relative Strength Index (RSI) remains below the 50 mark, indicating that the bearish momentum persists.
If the AUD/USD pair breaks above the descending channel, it could encounter initial resistance at the nine-day exponential moving average (EMA) around the 0.6758 level, followed by the key psychological resistance at 0.6800.
On the downside, the AUD/USD pair could target the lower boundary of the descending channel near the 0.6630 level, with additional support at its eight-week low of 0.6622, last recorded on September 11.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of the Australian Dollar (AUD) against major currencies today. Australian dollar was the weakest currency against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.05% | -0.21% | 0.01% | -0.05% | 0.12% | -0.17% | |
| EUR | -0.01% | -0.06% | -0.23% | -0.02% | -0.05% | 0.10% | -0.18% | |
| GBP | 0.05% | 0.06% | -0.16% | 0.05% | 0.00% | 0.16% | -0.06% | |
| JPY | 0.21% | 0.23% | 0.16% | 0.21% | 0.15% | 0.31% | 0.07% | |
| CAD | -0.01% | 0.02% | -0.05% | -0.21% | -0.06% | 0.11% | -0.12% | |
| AUD | 0.05% | 0.05% | -0.01% | -0.15% | 0.06% | 0.16% | -0.07% | |
| NZD | -0.12% | -0.10% | -0.16% | -0.31% | -0.11% | -0.16% | -0.23% | |
| CHF | 0.17% | 0.18% | 0.06% | -0.07% | 0.12% | 0.07% | 0.23% |
The heat map shows percentage changes for 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 box will represent the AUD (base)/USD (quote).
The Australian Dollar FAQs
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.
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.
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.
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.
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.
