Australian Dollar Maintains Position After Trimming Gains, Awaits Aussie Consumer Confidence

The Australian Dollar (AUD) began the week by recuperating from recent losses despite a slight dip in the US Dollar (USD) amidst higher US Treasury yields. The AUD/USD pair traded higher on Monday, supported by several factors, including a more muscular Chinese Yuan (CNY) and a rise in the ASX 200 Index, mainly driven by gains in the mining and energy sectors.

Australia’s government has pledged to back a minimum wage increase aligned with inflation in 2024, acknowledging the financial challenges low-income families face due to rising living costs.

The Chinese Yuan (CNY) experienced a notable upward movement, attributed to foreign exchange intervention, with significant Chinese state banks observed selling USD/CNY.

Meanwhile, Federal Reserve Bank of Atlanta President Raphael Bostic revised his earlier forecast of two interest rate cuts this year, now expecting only one. This adjustment was influenced by persistent inflation and stronger-than-anticipated economic data.

Investors closely monitor key economic indicators such as the February Australian monthly Consumer Price Index (CPI) data and the US Gross Domestic Product (GDP) for the fourth quarter of 2023.

Despite a correction in the US Dollar Index (DXY) from its recent five-week high, the USD may face downward pressure as the Federal Reserve (Fed) prepares for the anticipated commencement of an easing cycle in June. Fed Chair Jerome Powell has emphasized the central bank’s cautious approach towards reacting to inflationary pressures.

Critical economic data and statements, including Australian Employment Change and Unemployment Rate figures, further contribute to market sentiment. Additionally, China’s Premier Li Qiang comments on macroeconomic policy adjustments and updates on global PMI figures impact market dynamics.

Technical analysis suggests that the Australian Dollar is hovering near 0.6530 on Monday, with resistance levels identified at the 23.6% Fibonacci retracement level and psychological barriers. Support levels are observed at key psychological and previous low levels.

Investors continue to assess market trends and economic developments to make informed trading decisions amidst evolving global financial conditions.

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 strongest against the Swiss Franc.

 USDEURGBPCADAUDJPYNZDCHF
USD -0.07%-0.05%-0.09%-0.14%-0.01%-0.14%0.03%
EUR0.08% 0.02%-0.02%-0.05%0.08%-0.02%0.13%
GBP0.05%-0.02% -0.03%-0.07%0.06%-0.04%0.10%
CAD0.08%0.01%0.03% -0.04%0.10%-0.01%0.14%
AUD0.14%0.05%0.08%0.05% 0.11%0.00%0.16%
JPY0.01%-0.07%0.06%-0.09%-0.11% -0.07%0.06%
NZD0.08%0.06%0.09%0.05%0.01%0.14% 0.20%
CHF-0.05%-0.13%-0.11%-0.14%-0.16%-0.04%-0.15% 
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).

AUSTRALIAN DOLLAR FAQS

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate, and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods, and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought-after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

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