- The Australian dollar moves up in the Asian session on Tuesday.
- The manufacturing PMI Caixin de China rose to 51.2 in March compared to 51.1 expected.
- The operators will closely observe the decision on RBA rates on Tuesday.
The Australian dollar (AUD) wins traction on Tuesday, driven by the encouraging China’s economic data. The latest data published on Tuesday showed that the PMI manufacturing Caixin of China improved 51.2 in March from 50.8 in February. This reading was better than the expectation of 51.1. However, the bullish potential for the pair could be limited in the midst of global commercial uncertainties. The markets could become cautious before the reciprocal tariffs of US President Donald Trump on Wednesday, which could undermine the AUD.
All eyes will be put in the decision on the interest rates of the Bank of the Reserve of Australia (RBA) on Tuesday. It is anticipated that the RBA maintains interest rates without changes in the April meeting while waiting for the development of an electoral campaign focused on issues of life costs and prepares for the economic impact of a change promoted by the US in the global trade. The press conference of the Governor of the RBA, Michele Bullock, will continue at 04:30 GMT. In the American front, the Purchase Managers Index (PMI) of the ISM for March will be at the Center for Care.
The Australian dollar moves up before the decision on RBA rates
- China’s manufacturing NBS PMI rose to 50.5 in March compared to 50.2 above, in line with the market consensus. Meanwhile, the non -manufacturing NBS PMI rose to 50.8 in March from 50.4 in February and was stronger than the estimation of 50.5.
- Trump declared late on Monday that his reciprocal tariff plan will be directed to all other countries when they are revealed on Wednesday. He denied that additional tariffs are directed only at the ten or fifteen shopping partners who have their own import tariffs on US assets.
- Australian retail sales increased an intermencing 0.2% in February, compared to an increase of 0.3% in January, according to the Australian Statistics Office (ABS) on Tuesday. The reading was below the market expectations of 0.3%.
- Economists surveyed by Bloomberg expect the Australian Central Bank to maintain its rate at 4.1% and adopt a cautious posture after having reduced rates for the first time in four years last month.
The Australian dollar maintains a bassist inclination within a symmetrical triangle
The Aud/USD quotes firmer on the day. The pair is within the symmetrical triangle pattern in the daily temporal framework. The negative aud/USD perspective is still valid, with the price remaining below the 100 -day exponential (EMA) mobile average. The downward impulse is supported by the 14 -day relative force (RSI) index, which is below the midline about 41.50, supporting sellers in the short term.
The lower limit of the triangle pattern at 0.6225 acts as an initial support level for the torque. Extended losses could see a fall to 0.6186, the minimum of March 4. Further south, the next containment level is located at 0.6130, the minimum of January 13.
On the contrary, the first barrier for the AUD/USD is observed in 0.6330, the maximum of March 26. The next obstacle to observe is 0.6352, the 100 -day EMA. A decisive rupture above this level could see a rebound towards 0.6370, the upper limit of the symmetrical triangle pattern.
RBA FAQS
The Bank of the Australian Reserve (RBA) sets interest rates and manages Australia’s monetary policy. The decisions are made by a advice of governors in 11 meetings per year and in the necessary emergency meetings that are necessary. The main mandate of the RBA is to maintain price stability, which means an inflation rate of 2%-3%, but also “… contribute to the stability of currency, full employment and economic prosperity and the well-being of the Australian people.” Its main tool to achieve this is to raise or lower interest rates. Relatively high interest rates will strengthen the Australian dollar (AUD) and vice versa. Other RBA tools are the quantitative relaxation and hardening of monetary policy.
Although traditionally it has always been considered that inflation is a negative factor for currencies, since it reduces the value of money in general, the truth is that in modern times the opposite has happened with the relaxation of cross -border capital controls. Moderately high inflation now tends to take the central banks to raise their interest rates, which in turn has the effect of attracting more capital of world investors who are looking for a lucrative place to keep their money. This increases the demand for the local currency, which in the case of Australia is the Australian dollar.
Macroeconomic data calibrates the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in safe and growing economies than in precarious and contraction economies. A greater influx of capital increases aggregate demand and the value of the national currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment and surveys about consumer feeling can influence the AUD. A strong economy can encourage the Bank of the Australian Reserve to raise interest rates, also supporting the Aud.
The quantitative easing (QE) is a tool used in extreme situations in which to lower interest rates is not enough to restore credit flow in the economy. The QE is the process by which the Bank of the Australian Reserve (RBA) prints Australian dollars (AUD) in order to buy assets – normally State or business bonds – to financial institutions, thus providing them with the liquidity they need so much. The one usually translates into a weaker audience.
The quantitative hardening (QT) is the reverse of the QE. It is carried out after the QE, when economic recovery is underway and inflation begins to increase. While in the QE the Bank of the Australian Reserve (RBA) buys state and business bonds from financial institutions to provide liquidity, in QT the RBA stops buying more active and stops reinvesting the main one that expires of the bonds it already has. It 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.
