- Australian Dollar retraces its recent losses amid a stronger US Dollar.
- RBA minutes revealed that the board did not consider the possibility of increasing interest rates.
- Chinese Yuan has reached a four-and-a-half-month low, prompting support from China.
- US ISM Manufacturing PMI rose to 50.3 in March, reaching its highest level since September 2022.
The Australian Dollar (AUD) recovers its losses registered in the previous session, edging higher on Tuesday. The US Dollar (USD) received a boost as US Treasury bond yields surged overnight due to the positive ISM Manufacturing PMI data from the United States (US). This development created headwinds for the AUD/USD pair. The March meeting minutes of the Reserve Bank of Australia (RBA) revealed that the central bank did not entertain the possibility of raising interest rates.
The Reserve Bank of Australia is expected to maintain the current cash rate until at least November due to inflation rates persisting higher than those in other countries, coupled with a tight job market. Despite concerns over potential fluctuations in inflation, experts suggest that this trajectory is unlikely to prevent the RBA from eventually implementing monetary policy easing measures.
The US Dollar Index (DXY) continues its winning streak for the fifth successive session. This trend is attributed to traders reducing their expectations for a quarter-point interest rate cut by the Federal Reserve in its June meeting. Nevertheless, Federal Reserve Chairman Jerome Powell indicated on Friday that recent US inflation data is in line with the anticipated path, reinforcing the Fed’s position on interest rate adjustments for the year.
Daily Digest Market Movers: Australian Dollar depreciates after stronger US ISM data
- Australia’s TD Securities Inflation (YoY) came in at 3.8% in March, against the previous increase of 4.0%.
- Melbourne Institute’s Monthly Inflation Gauge increased by 0.1% in March, following a decrease of 0.1% in the previous month.
- ANZ Job Advertisements declined by 1.0% in March, compared to the previous decline of 2.1%.
- 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.
- According to Rodrigo Catril from NAB, the Reserve Bank is likely to face difficulties in declaring victory on inflation and might postpone rate cuts until 2025.
- On Monday, China’s Caixin Manufacturing PMI came in at 51.1, against the expected 51.0 and 50.9 prior.
- China’s National Bureau of Statistics (NBS) announced on Sunday that the monthly NBS Manufacturing PMI rose to 50.8 in March from 49.1 in the prior month. Additionally, the NBS Non-Manufacturing PMI increased to 53.0 in March from 51.4 in February.
- On Thursday, San Francisco Federal Reserve (Fed) President Mary C. Daly emphasized that although the Fed stands prepared to decrease rates when data supports such action, there’s no need for haste as the US economy remains robust with minimal risk of weakening.
- US ISM Manufacturing PMI indicated a surprise expansion in March, as the index climbed to 50.3 in March from February’s 47.8, surpassing expectations of 48.4. This reading marked the highest level observed since September 2022.
- US ISM Manufacturing Prices Paid increased to 55.8 in March, compared to the expected 52.6 and 52.5 prior.
- US Core PCE came at 0.3% (MoM) in February against January’s 0.5%, aligned with the market consensus. The annual index rose by 2.8% as expected, compared to the previous increase of 2.9%.
- US Headline PCE (MoM) increased by 0.3%, slightly lower than expected and a previous rise of 0.4%. The year-over-year PCE increased by 2.5%, as expected.
Technical Analysis: Australian Dollar moves below the psychological level of 0.6500
The Australian Dollar trades near 0.6490 on Tuesday. The immediate support appears at March’s low at 0.6477, followed by the major level of 0.6450. A break below this level could prompt the AUD/USD pair to navigate the region around the psychological mark of 0.6400. On the upside, Immediate resistance appears at the psychological level of 0.6500. A breakthrough above the latter could lead the AUD/USD pair to reach the 23.6% Fibonacci retracement level of 0.6528 and the 21-day Exponential Moving Average (EMA) at 0.6537, followed by the major resistance level of 0.6550.
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 | 0.06% | 0.02% | 0.06% | 0.00% | 0.10% | 0.12% | 0.12% | |
| EUR | -0.06% | -0.03% | 0.00% | -0.06% | 0.04% | 0.05% | 0.07% | |
| GBP | -0.03% | 0.03% | 0.03% | -0.03% | 0.07% | 0.09% | 0.09% | |
| CAD | -0.06% | 0.00% | -0.03% | -0.06% | 0.04% | 0.06% | 0.07% | |
| AUD | 0.00% | 0.05% | 0.04% | 0.06% | 0.10% | 0.12% | 0.12% | |
| JPY | -0.09% | -0.04% | -0.06% | -0.03% | -0.08% | 0.02% | 0.03% | |
| NZD | -0.12% | -0.06% | -0.09% | -0.06% | -0.11% | -0.02% | 0.00% | |
| CHF | -0.13% | -0.08% | -0.10% | -0.08% | -0.14% | -0.04% | -0.01% |
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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- Source: https://www.fxstreet.com/news/australian-dollar-plunges-after-upbeat-us-ism-data-rba-board-considers-no-rate-hikes-202404020136
