Australian Dollar plunges amid a stronger US Dollar, GDP Annualized eyed

  • Australian Dollar turns tepid amid a risk aversion sentiment on Thursday.
  • Australia’s Retail Sales (MoM) increased by 0.3%, against the expected 0.4% and 1.1% prior.
  • US Dollar corrects ahead of US GDP Annualized data due on Thursday.

The Australian Dollar (AUD) loses ground on Thursday as risk aversion prevails on Thursday. Challenges persisted for the AUD/USD pair due to softer Consumer Inflation Expectations and Retail Sales figures from Australia. These factors heightened expectations of the Reserve Bank of Australia (RBA) considering interest rate cuts in the second half of 2024. Additionally, Wednesday's release of the softer Australian Monthly Consumer Price Index supported this perspective.

Australia's consumer expectations for future inflation stood at 4.3% in March, a slight decrease from the previous increase of 4.5%. February's seasonally adjusted Retail Sales showed a month-over-month increase of 0.3%, falling short of the expected 0.4% and the prior 1.1%. Additionally, on Wednesday, Australia's Monthly Consumer Price Index (YoY) for February saw a 3.4% rise, maintaining consistency with previous levels but slightly below the anticipated 3.5%.

The US Dollar Index (DXY) appears to pause its two-day winning streak, edging lower in anticipation of the upcoming release of US Personal Consumption Expenditures (PCE) data scheduled for Friday. Nevertheless, the recent uptick in US Treasury yields may have lent support to the US Dollar (USD) amid divergent opinions among members of the Federal Open Market Committee (FOMC) regarding monetary policy easing.

Daily Digest Market Movers: Australian Dollar loses ground on risk aversion

  • Australia’s Westpac Consumer Confidence dipped 1.8% to 84.4 in March 2024 from February's 86.0, easing from 20-month highs.
  • Australia’s Westpac Leading Index (MoM) increased by 0.1% in February, against the previous decline of 0.09%.
  • Australia's government has pledged to support a minimum wage increase aligned with inflation this year, recognizing the ongoing challenges low-income families face amid rising living costs.
  • At the Boao Forum for Asia (BFA), China's top legislator, Zhao Leji, emphasized China's stance on inclusive economic globalization. He stated that China opposes unilateralism and protectionism in all their forms and is committed to closely linking its development with other countries.
  • Federal Reserve Board Governor Christopher Waller still sees 'no rush' to cut rates amid sticky inflation data.
  • Atlanta Fed President Raphael Bostic expressed his expectation for just one rate cut this year, cautioning that reducing rates prematurely could lead to greater disruption.
  • Fed Governor Lisa Cook cautioned against easing policy too soon, warning that it could exacerbate the risk of inflation becoming entrenched.
  • Chicago Fed President Austan Goolsbee, leaning towards a dovish stance, expects three cuts but indicates a need for more evidence of inflation subsiding before taking action.
  • US Durable Goods Orders increased by 1.4% in February, against the 1.3% expected and previous decline of 6.9%.
  • US Durable Goods Orders ex Defense rose by 2.2% in February, compared to the expected 1.1% and 7.9% previous decline.
  • US Housing Price Index (MoM) decreased by 0.1% in January, against the December’s increase of 0.1%.

Technical Analysis: Australian Dollar could test the major barrier of 0.6550

The Australian Dollar traded near 0.6530 on Thursday. Immediate resistance is observed around the 23.6% Fibonacci retracement level at 0.6541, coinciding with the major barrier of 0.6550 and the 21-day Exponential Moving Average (EMA) at 0.6553. On the downside, a notable support level is at the psychological mark of 0.6500, followed by March’s low at 0.6477. A breach below this level may lead the AUD/USD pair to test the major support level at 0.6450.

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 US Dollar.

USD   0.20% 0.06% 0.12% 0.41% 0.05% 0.40% 0.04%
EUR -0.20%   -0.13% -0.07% 0.22% -0.15% 0.20% -0.16%
GBP -0.06% 0.14%   0.06% 0.36% -0.02% 0.34% -0.02%
CAD -0.13% 0.07% -0.07%   0.29% -0.07% 0.27% -0.08%
AUD -0.45% -0.23% -0.38% -0.32%   -0.37% -0.04% -0.40%
JPY -0.06% 0.16% 0.02% 0.08% 0.39%   0.34% 0.00%
NZD -0.41% -0.19% -0.34% -0.27% 0.02% -0.31%   -0.36%
CHF -0.06% 0.16% 0.02% 0.08% 0.38% 0.00% 0.36%  

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).


Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate, and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk-on positive for 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 main goal of the RBA 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. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods, and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater 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 versus 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, then its currency will gain in value purely from the surplus demand created by foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.


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