Market Data 
- Australian Dollar remains tepid as market bias leans towards RBA adopting a dovish stance.
- Australia’s central bank may consider cutting interest rates in the second half of 2024.
- US Dollar strengthens as recent data suggests that the Fed may delay implementing rate cuts shortly.
The Australian Dollar (AUD) extends its losses for the second successive session on Friday. However, market activity is expected to be subdued due to light trading on Good Friday. Meanwhile, the US Dollar (USD) strengthens as recent data indicates annualized economic expansion in the United States (US), driven by consumer spending. This development undermines the AUD/USD pair.
The Australian Dollar encountered difficulties amid weaker Consumer Inflation Expectations and Retail Sales figures from Australia. These indicators raised expectations of potential interest rate cuts by the Reserve Bank of Australia (RBA) in the latter half of 2024. Furthermore, Wednesday’s release of the softer Australian Monthly Consumer Price Index further reinforced this outlook.
The US Dollar Index (DXY) seems poised to extend its winning streak, buoyed by hawkish comments from a Federal Reserve (Fed) official that bolstered the Greenback. Fed Governor Christopher Waller’s remarks on Wednesday suggested that the central bank might delay interest rate cuts in light of robust inflation data. Investors now await the US Personal Consumption Expenditures (PCE) report on Friday, which serves as the Fed’s preferred inflation gauge, to gain additional insight and guidance.
Daily Digest Market Movers: Australian Dollar depreciates as RBA may adopt a dovish stance
- Australia’s Consumer Inflation Expectations came in at 4.3% in March, a slight decrease from the previous increase of 4.5%.
- The seasonally adjusted Aussie Retail Sales showed a month-over-month increase of 0.3% in February, falling short of the expected 0.4% and the prior 1.1%.
- 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%.
- 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.
- US Gross Domestic Product Annualized expanded by 3.4% in the fourth quarter of 2023. The market expectation was to be unchanged at a 3.2% increase.
- The US Gross Domestic Product Price Index remained consistent at a 1.7% increase, as expected in Q4.
- Core Personal Consumption Expenditures (QoQ) came in at 2.0% in the fourth quarter, slightly below the expected and previous reading of 2.1%.
- US Initial Jobless Claims fell to 210K in the week ending on March 22, against the expected increase to 215K from 212K prior.
Technical Analysis: Australian Dollar hovers above psychological support at the 0.6500 level
The Australian Dollar trades near 0.6510 on Friday. Immediate resistance is noted around the 23.6% Fibonacci retracement level at 0.6528, followed by the 21-day Exponential Moving Average (EMA) at 0.6547, and the significant barrier of 0.6550. On the downside, a notable support level is located at the psychological mark of 0.6500, followed by March’s low at 0.6477. A breach below this level could potentially lead the AUD/USD pair to test the major support level at 0.6450.
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 Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.29% | -0.20% | -0.52% | 0.03% | 0.01% | 0.24% | 0.51% | |
| EUR | -0.27% | -0.49% | -0.80% | -0.25% | -0.29% | 0.01% | 0.22% | |
| GBP | 0.20% | 0.48% | -0.31% | 0.25% | 0.19% | 0.50% | 0.71% | |
| CAD | 0.50% | 0.78% | 0.30% | 0.56% | 0.51% | 0.81% | 1.01% | |
| AUD | -0.03% | 0.25% | -0.23% | -0.57% | -0.06% | 0.22% | 0.47% | |
| JPY | -0.02% | 0.29% | -0.11% | -0.51% | 0.04% | 0.27% | 0.52% | |
| NZD | -0.30% | 0.04% | -0.45% | -0.78% | -0.21% | -0.28% | 0.25% | |
| CHF | -0.50% | -0.22% | -0.69% | -1.03% | -0.48% | -0.50% | -0.22% |
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 has always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has 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.
