- Australian Dollar trims intraday gains amid improved US Dollar.
- Australian equity market experiences gains; supporting the Aussie Dollar.
- Bloomberg survey of economists finds the consensus expectation is for the PBoC to implement two additional RRR cuts in 2024.
- Greenback struggles with the expectation of the Fed initiating a rate cut cycle starting in June.
The Australian Dollar (AUD) pares its intraday gains on Tuesday. However, the decline in the US Dollar (USD) helped to support the AUD/USD pair during the early Asian hours. The AUD faced slight downward pressure following the release of Australia’s Westpac Consumer Confidence data, which dipped 1.8% to 84.4 in March 2024 from February’s 86.0, easing from 20-month highs.
The Australian equity market found support from expectations of a rate cut, driven by a decline in the Aussie consumer confidence, contributing to the strength of the Australian Dollar. Despite modest weakness on Wall Street overnight, the ASX 200 Index extended its winning streak. Investors are anticipated to closely monitor the release of the Australian monthly Consumer Price Index (CPI) data on Wednesday.
The US Dollar Index (DXY) experienced a second consecutive day of losses, largely attributed to declining US Treasury yields. Market sentiment is leaning towards expectations of the Federal Reserve (Fed) commencing an easing cycle, with speculations pointing towards a potential start in June.
Daily Digest Market Movers: Australian Dollar loses ground on weaker ASX 200
- Australia’s government has pledged to support a minimum wage increase aligned with inflation this year, recognizing the ongoing challenges faced by low-income families amid rising living costs.
- According to a Bloomberg survey of economists, the consensus expectation is for the People’s Bank of China (PBoC) to implement two additional Reserve Requirement Ratio (RRR) cuts in 2024, amounting to a total reduction of 50 basis points.
- Chinese President Xi Jinping is set to meet with American business leaders in Beijing on Wednesday, following up on his November dinner with US investors in San Francisco. The meeting was initiated by Evan Greenberg, the chief executive of US insurer Chubb. Among the attendees are Stephen Orlins, president of the National Committee on US-China Relations, and Craig Allen, president of the US-China Business Council.
- 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.
- Chicago Fed President Austan Goolsbee aligns with the majority of the board, anticipating three cuts. However, Goolsbee mentioned the necessity for further evidence indicating a decrease in inflation before proceeding with rate cuts.
- US New Home Sales Change declined by 0.3% month-over-month, compared to the previous rise of 1.7%.
- US New Home Sales (MoM) came in at 0.662M, which is below the expected 0.680M in February and 0.664M prior.
- S&P Global Services PMI showed a slight decrease in March, dropping to 51.7 from 52.3. The expected reading was 52.0. Manufacturing PMI rose to 52.5 against the expected 51.7 and 52.2 prior. Composite PMI showed a slight dip to 52.2 from 52.5 prior.
- Initial Jobless Claims for the week ending on March 15 came in at 210K, below the 215K expected and 212K prior.
Technical Analysis: Australian Dollar moves below the major level of 0.6550
The Australian Dollar traded near 0.6550 on Tuesday. If it surpasses this level, it could encounter immediate resistance around the major barrier of 0.6550, in conjunction with the nine-day Exponential Moving Average (EMA) at 0.6554. A successful breakthrough above this level might propel the AUD/USD pair to test the 38.2% Fibonacci retracement level at 0.6565. On the downside, if the price retreats, a significant support level lies at the psychological mark of 0.6500, followed by March’s low at 0.6477.
AUD/USD: Daily Chart
Australian Dollar price this week
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the weakest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.29% | -0.34% | -0.20% | -0.35% | 0.06% | -0.27% | 0.32% | |
| EUR | 0.30% | -0.04% | 0.10% | -0.03% | 0.34% | 0.09% | 0.61% | |
| GBP | 0.33% | 0.03% | 0.15% | 0.01% | 0.39% | 0.12% | 0.65% | |
| CAD | 0.18% | -0.11% | -0.13% | -0.15% | 0.24% | -0.03% | 0.50% | |
| AUD | 0.34% | 0.04% | 0.01% | 0.15% | 0.38% | 0.07% | 0.66% | |
| JPY | -0.06% | -0.34% | -0.29% | -0.23% | -0.36% | -0.31% | 0.27% | |
| NZD | 0.21% | -0.03% | -0.07% | 0.07% | -0.08% | 0.31% | 0.58% | |
| CHF | -0.31% | -0.62% | -0.65% | -0.50% | -0.65% | -0.27% | -0.53% |
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).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over some time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attracts more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flip side, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
