- The Australian Dollar consolidates after China’s PMI was released on Friday.
- The AUD could appreciate due to the hawkish sentiment surrounding the RBA hiking rates again.
- The US Dollar rebounds despite the lower US Treasury yields ahead of Core PCE.
The Australian Dollar (AUD) moves sideways after lower-than-expected NBS Purchasing Managers Index (PMI) data was released from China on Friday. Given the close trade relationship between Australia and China, any changes in the Chinese economy can significantly impact the Australian market. However, the AUD/USD pair had gained ground earlier in the day as the US Dollar (USD) struggled due to a slowdown in the US economy.
The AUD also found support as the monthly inflation rate accelerated to 3.6%, raising the possibility that the Reserve Bank of Australia (RBA) might need to hike interest rates again. Investors anticipate that the RBA will maintain high rates for a longer period, with a rate cut not expected until May next year.
The US Dollar Index (DXY), which measures the US Dollar against six major currencies, could receive pressure from a drop in US Treasury yields. This could be attributed to the US Gross Domestic Product (GDP) Annualized growth rate being revised lower to 1.3% from 1.6% for the first quarter. Traders are likely looking ahead to the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, which will be released on Friday.
Daily Digest Market Movers: Australian Dollar consolidates after lower China PMI
- China’s NBS Manufacturing Purchasing Managers Index (PMI) fell to 49.5 in May from 50.4 in April, missing the market consensus of an increase to 50.5. Meanwhile, the Non-Manufacturing PMI declined to 51.1 from the previous reading of 51.2, falling short of the estimated 51.5.
- Australia’s Private Capital Expenditure increased by 1.0% in Q1, exceeding expectations for a 0.5% rise and surpassing the previous quarter’s 0.9% increase.
- As per a Bloomberg report, RBA Assistant Governor Sarah Hunter said at a conference in Sydney on Thursday that “inflationary pressures” are the key issue. “We’re very mindful of that.” Hunter also stated that the RBA Board is concerned about inflation remaining above the target range of 1%-3%, suggesting persistent inflationary pressure. Wages growth appears to be near its peak.
- Bloomberg reported on Wednesday that Atlanta Fed President Raphael Bostic stated that the path to 2% inflation is not assured and that the breadth of price gains is still significant.
- Australia’s Monthly Consumer Price Index rose 3.6% year-over-year in April, surpassing the expected reading of 3.4% and the previous reading of 3.5%.
- On Tuesday, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, suggested that a rate hike might still be possible. Kashkari stated, “I don’t think anybody has taken rate increases off the table,” and expressed uncertainty about the disinflationary process, predicting only two rate cuts, per MSN.
- US Housing Price Index (MoM) for March was underperformed, with March’s number coming in at 0.1% against 1.2% for February, where 0.5% was expected.
Technical Analysis: Australian Dollar remains above the key level of 0.6600
The Australian Dollar trades around 0.6630 on Friday. An analysis of the daily chart suggests a bullish bias for the AUD/USD pair, as it consolidates within the rising wedge. The 14-day Relative Strength Index (RSI) is positioned slightly above the 50 level, suggesting a confirmation of a bullish bias.
The AUD/USD pair could target the psychological level of 0.6700, followed by the four-month high of 0.6714 and the upper limit of the rising wedge around 0.6740.
On the downside, the immediate support appears at the psychological level of 0.6600 around the lower boundary of the rising wedge. Next support appears at the 50-day Exponential Moving Average (EMA) at 0.6588. A further decline could exert downward pressure on the AUD/USD pair, potentially driving it toward the throwback support region at 0.6470.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.14% | 0.07% | -0.03% | -0.08% | -0.12% | -0.20% | 0.04% | |
| EUR | -0.12% | -0.07% | -0.16% | -0.20% | -0.24% | -0.32% | -0.08% | |
| GBP | -0.06% | 0.07% | -0.09% | -0.13% | -0.18% | -0.25% | -0.02% | |
| CAD | 0.03% | 0.16% | 0.10% | -0.04% | -0.09% | -0.16% | 0.07% | |
| AUD | 0.07% | 0.18% | 0.13% | 0.04% | -0.05% | -0.10% | 0.10% | |
| JPY | 0.13% | 0.22% | 0.16% | 0.08% | 0.04% | -0.05% | 0.16% | |
| NZD | 0.17% | 0.29% | 0.23% | 0.12% | 0.10% | 0.02% | 0.23% | |
| CHF | -0.04% | 0.08% | 0.02% | -0.07% | -0.12% | -0.16% | -0.21% |
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).
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g. Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
