- Australian Dollar loses ground amid a stable US Dollar.
- Australian Consumer Confidence jumped 6.2% to 86 in February.
- The US Dollar holds ground despite subdued US Treasury yields.
- US CPI YoY and MoM could moderate to 3.0% and 0.2%, respectively, in January.
The Australian Dollar (AUD) retreats after posting gains in the previous two sessions, despite the release of improved Australia Consumer Confidence data on Tuesday. The Westpac-Melbourne Institute Consumer Sentiment index surged 6.2% to 86 in February from 81 in January, marking its highest reading in 20 months. However, the index remained below the neutral 100 mark since February 2022.
Australian Dollar faces downward pressure as Australian inflation moderates, leading to the market sentiment that the Reserve Bank of Australia (RBA) has completed its monetary tightening cycle. This downward trend in the Aussie Dollar weighs on the AUD/USD pair. Additionally, the Australian money market’s decline may further constrain the AUD’s performance.
The US Dollar Index (DXY) holds steady after recent gains, with the decline in US Treasury yields capping the strength of the US Dollar (USD). Market sentiment is mixed, as traders exercise caution ahead of the release of important US inflation data scheduled for Tuesday, which could influence expectations regarding interest rates.
Daily Digest Market Movers: Australian Dollar declines amid a stable US Dollar
- National Australia Bank’s Business Confidence improved to the reading of 1 in January from the previous flat of 0.
- National Australia Bank’s Business Conditions decreased to 6 in January from 8 prior.
- RBA’s Head of Economic Analysis, Marion Kohler, emphasized uncertainty regarding current inflation projections for the Australian economy. However, she anticipates that price growth will eventually return to a more moderate level by 2025.
- The Commonwealth Bank of Australia (CBA) forecasted a reduction of 75 basis points in the benchmark interest rate for 2024, with the initial cut anticipated in September.
- China’s headline CPI declined by 0.8%, exceeding the anticipated decline of 0.5% and the previous decline of 0.3%.
- Dallas Federal Reserve (Fed) Bank President Lorie K. Logan remarked on Friday that there is currently no pressing need to lower interest rates. She acknowledged “tremendous progress” in curbing inflation but emphasized the necessity for additional evidence to ensure the sustainability of this progress.
- US Monthly Budget Statement came in with the reading of $-22B in January, against the expected reading of $-21B and $-129B prior.
- 3-Month and 6-Month US Bill was auctioned at the rate of 5.23% and 5.065%, respectively.
Technical Analysis: Australian Dollar trades near 0.6530 before the 14-day EMA
The Australian Dollar trades near 0.6520 on Tuesday, situated below the immediate resistance of the 14-day Exponential Moving Average (EMA) at 0.6544 aligned with the major barrier at 0.6550 level. A breakthrough above this major level could potentially prompt the AUD/USD pair to target key levels such as the 23.6% Fibonacci retracement level at 0.6563 and the psychological resistance at 0.6600. On the downside, the psychological level of 0.6500 could act as immediate support. A break below the latter could push the AUD/USD pair to revisit the previous week’s low at 0.6468 followed by the major support level of 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 | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.10% | 0.12% | 0.04% | 0.17% | 0.10% | 0.50% | 0.11% | |
| EUR | -0.09% | 0.03% | -0.05% | 0.06% | 0.00% | 0.39% | 0.00% | |
| GBP | -0.12% | -0.03% | -0.09% | 0.03% | -0.02% | 0.37% | -0.04% | |
| CAD | -0.04% | 0.05% | 0.08% | 0.10% | 0.06% | 0.45% | 0.05% | |
| AUD | -0.17% | -0.06% | -0.04% | -0.11% | -0.06% | 0.33% | -0.04% | |
| JPY | -0.10% | 0.00% | 0.02% | -0.06% | 0.08% | 0.39% | -0.01% | |
| NZD | -0.50% | -0.40% | -0.38% | -0.46% | -0.34% | -0.40% | -0.41% | |
| CHF | -0.09% | 0.00% | 0.03% | -0.04% | 0.04% | 0.01% | 0.40% |
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).
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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