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Australian Dollar holds ground after trimming intraday gains, US Consumer Sentiment eyed

  • Australian Dollar moves sideways after trimming intraday gains.
  • Aussie pair dipped post-release of the US headline inflation.
  • Consumer Inflation Expectations raised the odds of RBA to increase interest rates.
  • US Dollar advanced following the slew of upbeat US data, awaiting US Consumer Sentiment.

The Australian Dollar (AUD) snaps a two-day losing streak post a slew of optimistic economic data from the United States (US) during the week. With US inflation surpassing expectations and initial jobless claims coming in lower than anticipated, discussions about the trajectory of the US Federal Reserve's (Fed) monetary policy have been reignited.

Australia has experienced a rise in consumer expectations regarding inflation, a trend likely influenced by an increase in oil prices. The upcoming focal points include the release of Meeting Minutes from the Reserve Bank of Australia (RBA) and employment data in the next week.

This downbeat Chinese inflation data has the potential to impact the Australian Dollar, considering Australia's significant role as a major exporter to China. Economic dynamics between these two countries often influence the performance of the Aussie Dollar, and the subdued inflation figures from China may contribute to undermining its strength.

The US Dollar Index (DXY) gained upward momentum after a robust release of US data. Nonetheless, on Friday, the US Dollar (USD) is trading marginally lower, influenced by a retreat in US Treasury yields following a recent surge. Market participants are expected to redirect their attention to the Michigan Consumer Sentiment Index set to be released on Friday.

Investors seem to factor in the possibility of another Fed rate hike. This is noteworthy given the recent mixed rhetoric from most Fed officials, emphasizing the necessity for the US central bank to maintain higher rates for an extended period, even without signaling a clear intention for another rate increase.

Daily Digest Market Movers: Australian Dollar attempts to retrace recent losses on RBA interest rates trajectory

  • Australian Consumer Inflation Expectations for October have been reported at 4.8% on Thursday, showing a slight increase from the September figure of 4.6%.

  • Australia witnessed a rebound in inflation in August, largely driven by elevated oil prices. This resurgence raises the probability of another interest rate hike by the Reserve Bank of Australia (RBA).

  • The unfolding Middle East conflict adds a layer of complexity to the situation, potentially prompting the RBA to implement a 25 basis points (bps) interest rate hike, reaching 4.35% by the year's end.

  • The heightened geopolitical tension is fostering a surge in demand for commodities, particularly energy and gold. This surge is exerting a positive influence on the performance of the AUD/USD pair.

  • Australia’s Westpac Consumer Confidence showed that current buying conditions improved in October. The index rose 2.9% from the previous 1.5% decline in September.

  • The recent release of the Consumer Price Index (YoY) by the National Bureau of Statistics of China for September brought some notable figures. The reading of 0.0% came in lower than the expected 0.2% increase, compared to the previous reading of 0.1%. Meanwhile, the Producer Price Index year-over-year experienced a decline of 2.5%, surpassing the anticipated decrease of 2.4%.

  • The US Bureau of Labor Statistics (BLS) disclosed that the Consumer Price Index in the US surpassed forecasts in September. The annual basis figures expanded at a consistent rate of 3.7%, slightly exceeding estimates of 3.6%.

  • US Initial Jobless Claims for the week ending on October 6 showed a slight easing, despite an increase of 209K, which was slightly below the forecast of 210K.

  • US Producer Price Index (PPI) surged in September on a yearly basis, jumping from 2.0% to 2.2%, surpassing the anticipated 1.6%. Core PPI experienced a rise, climbing to 2.7% from the anticipated easing to 2.3%, surpassing the earlier figure of 2.5%.

  • The yields on US Treasury bonds advanced on Thursday on the back of solid US data, with the 10-year US Treasury bond yield marking the highest level at 4.72%.

  • The Federal Open Market Committee (FOMC) minutes shed light on a divergence of opinions, underlining the importance of data reliance. The consensus for additional interest rate hikes appears contingent on a significant uptick in inflation.

  • Some participants argue that as the policy rate approaches its peak, the focus should shift from the extent of rate increases to determining how long to maintain the policy rate at restrictive levels.

  • Market participants will likely monitor the US Michigan Consumer Sentiment Index on Friday. Although the Australian economic docket is empty on Friday, attention will shift to the Reserve Bank of Australia (RBA) meeting minutes and employment data scheduled for release in the coming week.

Technical Analysis: Australian Dollar holds ground above the major support level at 0.6300

The Australian Dollar trades around 0.6320, aligned to the major support level at 0.6300 lined up with a monthly low at 0.6285. The 23.6% Fibonacci retracement level at 0.6429 acts as strong resistance, followed by the 50-day Exponential Moving Average (EMA) at 0.6445 level. A clear breakthrough could pave the way for upward momentum, aiming at the psychological milestone of 0.6500.

AUD/USD: Daily Chart

Australian Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Pound Sterling.

 USDEURGBPCADAUDJPYNZDCHF
USD -0.10%-0.16%-0.07%0.01%-0.01%0.22%-0.10%
EUR0.10% -0.06%0.01%0.12%0.08%0.33%-0.01%
GBP0.13%0.04% 0.06%0.15%0.13%0.36%0.04%
CAD0.08%-0.01%-0.07% 0.11%0.06%0.31%-0.02%
AUD0.00%-0.11%-0.18%-0.09% -0.03%0.20%-0.12%
JPY0.01%-0.06%-0.16%-0.06%0.02% 0.25%-0.08%
NZD-0.24%-0.30%-0.35%-0.29%-0.21%-0.23% -0.33%
CHF0.12%0.03%-0.03%0.03%0.13%0.09%0.34% 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Economic Indicator

United States Michigan Consumer Sentiment Index

The Michigan Consumer Sentiment Index released by the University of Michigan is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money. Generally speaking, a high reading anticipates positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

Read more.

Next release: 10/13/2023 14:00:00 GMT

Frequency: Monthly

Source: University of Michigan

Why it matters to traders

Consumer exuberance can translate into greater spending and faster economic growth, implying a stronger labor market and a potential pick-up in inflation, helping turn the Fed hawkish. This survey’s popularity among analysts (mentioned more frequently than CB Consumer Confidence) is justified because the data here includes interviews conducted up to a day or two before the official release, making it a timely measure of consumer mood, but foremost because it gauges consumer attitudes on financial and income situations. Actual figures beating consensus tend to be USD bullish.

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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