- Australian Dollar depreciates after the release of mixed domestic economic numbers.
- Australia’s Trade Balance fell to 7,280M MoM in March from February’s reading of 10,058M.
- US Dollar could lose ground due to lower US Treasury yields.
The Australian Dollar (AUD) snaps its three-day winning streak following the release of unchanged Final Retail Sales and downbeat Trade Balance data from Australia on Friday. However, the US Dollar (USD) faced downward pressure due to softer labor market data from the United States (US) on Thursday, supporting the AUD/USD pair.
Australia’s Trade Surplus (Month-over-Month) narrowed to 7,280 million in March, falling short of the expected 10,400 million and February’s reading of 10,058 million, according to data published by the Australian Bureau of Statistics. Australia’s Exports decreased by 2.2% month-over-month, contrasting with the previous increase of 1.6%. Meanwhile, the nation’s Imports grew by 4.8%, compared to 1.3% prior.
The US Dollar Index (DXY) consolidates with a negative sentiment, reflecting the drop in US Treasury yields, possibly influenced by neutral comments from several Federal Reserve officials. However, the US Dollar might have attracted investors amid market caution due to escalating geopolitical tensions following Israel’s attack on Iran’s embassy in Syria.
Daily Digest Market Movers: Australian Dollar depreciates on mixed economic figures
- Australia’s Final Retail Sales were unchanged at 0.3% in February, which is in line with expectations.
- Australian Judo Bank Services PMI improved to 54.4 in March from 53.5 in February. Judo Bank Composite PMI increased to 53.3 from the previous reading of 52.4.
- Australia’s Building Permits (MoM) fell by 1.9% in February against the expected increase of 3.3% and the previous decline of 2.5%. In comparison, there is an increase of 5.2% YoY, compared to the previous increase of 4.8%.
- RBA March minutes showed that the board did not contemplate the option of raising interest rates. They unanimously agreed that it was challenging to definitively predict future changes in the cash rate. While the economic outlook remained uncertain, the risks appeared to be generally balanced. The board acknowledged that it would require “some time” before they could express confidence in inflation returning to the target level.
- Federal Reserve (Fed) Bank of Richmond President Thomas Barkin remarked that disinflation is expected to persist, although the pace of this trend remains uncertain. He stated, “I am open to rate cuts once it is clear that progress on inflation will be sustained and apply more broadly in the economy.”
- Loretta Mester, President of the Federal Reserve Bank of Cleveland, suggested on Thursday that she would be open to reducing the pace of securities runoff from the Fed’s balance sheet soon. She also anticipated to be in a position to lower the fed funds rate later this year.”
- Fed Chair Jerome Powell reaffirmed the US central bank’s preparedness to implement rate cuts, emphasizing a data-dependent approach. Atlanta Fed President Raphael Bostic’s remarks advocating for a rate cut in the final quarter of 2024.
- Adriana Kugler, a member of the Fed Board of Governors, highlighted that the ongoing disinflationary trend would necessitate rate reductions, with expectations of at least three cuts by the last quarter of 2024.
- US Initial Jobless Claims for the week ended March 29 rose by 9,000 to 221,000 from the previous week’s reading of 212,000, below the market consensus of 214,000.
- US Challenger Job Cuts posted 90.309K for March against the previous reading of 84.638K.
- US ADP Employment Change rose by 184K in March, compared to the 155K increase in February, above the market consensus of 148K.
- US ISM Services PMI eased to 51.4 in March from 52.6 in February, weaker than the expectation of 52.7. US ISM Manufacturing PMI climbed to 50.3 in March from February’s 47.8, surpassing expectations of 48.4.
Technical Analysis: Australian Dollar maintains position below the psychological mark of 0.6600
The Australian Dollar trades around 0.6570 on Friday. The immediate resistance region is observed around the 61.8% Fibonacci retracement level of 0.6596, coinciding with the psychological level of 0.6600. A breakthrough above this level could potentially propel the AUD/USD pair to explore the area around the major level of 0.6650 and March’s high of 0.6667. On the downside, key support is identified around the nine-day Exponential Moving Average (EMA) of 0.6552 and the major support level of 0.6550. A breach below the latter could exert downward pressure on the AUD/USD pair, potentially leading it toward the psychological level of 0.6500.
AUD/USD: Daily Chart
(This story was corrected on April 05 at 03:15 GMT to say, in the second bullet and paragraph, “February’s reading of 10,058M” instead 11,027M.)
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.10% | 0.11% | 0.23% | 0.37% | -0.03% | 0.32% | 0.09% | |
| EUR | -0.10% | 0.05% | 0.12% | 0.27% | -0.12% | 0.23% | 0.00% | |
| GBP | -0.12% | -0.03% | 0.09% | 0.24% | -0.15% | 0.19% | -0.04% | |
| CAD | -0.23% | -0.13% | -0.09% | 0.13% | -0.25% | 0.10% | -0.13% | |
| AUD | -0.36% | -0.26% | -0.25% | -0.12% | -0.39% | -0.04% | -0.28% | |
| JPY | 0.03% | 0.13% | 0.17% | 0.24% | 0.39% | 0.35% | 0.12% | |
| NZD | -0.33% | -0.22% | -0.21% | -0.09% | 0.05% | -0.35% | -0.25% | |
| CHF | -0.10% | 0.01% | 0.02% | 0.13% | 0.28% | -0.12% | 0.23% |
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.
