Australian Dollar drifting after mixed confidence data

The Australian dollar is showing little movement on Tuesday.  In the European session, AUD/USD is trading at 0.6279, up 0.05% on the day.

Australian business confidence jumps, consumer confidence stagnant

Australian confidence indicators were mixed on Tuesday.  The Westpac consumer sentiment index climbed 0.1% in February to 92.2 points, which means a majority of the surveyed consumers were pessimistic about econmic conditions.  The reading bounced back from a 0.7% decline in January but was shy of the forecast of 0.4%.  Consumer confidence remains weak as consumers have been squeezed by high inflation and elevated interest rates.  The survey noted that consumers have become more confident that the central bank will lower rates.

The National Australia Bank’s (NAB) business confidence index, which rose 6 points in January to +4. However, business conditions index dropped to +3 from +6 a month earlier, as profitability and employment weakened.  The NAB survey noted that retail spending has improved and this trend would need to continue if business conditions were to improve.

The mixed confidence numbers come just one week before a crucial Reserve Bank of Australia meeting.  A rate cut is virtually certain at the meeting, which would mark the RBA’s first rate cut since Nov. 2020.  The RBA is yet to join the easing cycle which other major central banks have implemented as inflation has fallen.

The Federal Reserve is widely expected to continue to maintain interest rates at the March meeting.  The US economy remains robust and the labor market has slowed gradually, which means there isn’t much pressure on Fed policy makers to lower rates in the coming months.  Barring unexpected economic news, the Fed is expected to cut rates no more than one or two times in 2025.

AUD/USD technical

• AUD/USD tested support at 0.6267 earlier. Below, there is support at 0.6245

• There is resistance at 0.6299 and 0.6321.