Home Forex Aussie Dollar Rises Despite Steady US Dollar, Australia's Unemployment Rate Expected

Aussie Dollar Rises Despite Steady US Dollar, Australia's Unemployment Rate Expected

by SuperiorInvest


  • The Australian dollar lost ground as the US dollar rose on positive US CPI figures.
  • Australia's ASX 200 index falls; putting pressure on the AUD.
  • The US dollar strengthened thanks to positive US government bond yields.
  • Robust US CPI figures dashed chances of a March Fed rate cut.

The Australian dollar (AUD) is trying to retrace its recent losses seen in the previous session. AUD/USD's decline was driven by robust US inflation data for January, dashing hopes of an imminent rate cut by the Federal Reserve (Fed) in March.

The Australian dollar was under downward pressure as the S&P/ASX 200 fell to three-week lows, led by a sell-off in mining and financial stocks after Wall Street fell overnight in response to stronger-than-expected US inflation numbers.

The American dollar The index (DXY) remains steady near three-month highs supported by recent gains, while US yields are trading at multi-week highs across the yield curve. Market sentiment has moved dramatically, with expectations of an unchanged rate next month soaring to 93%, in stark contrast to the previous month. Investors are now appreciating the possibility of a rate cut Fed in June.

Daily Digest Market Movers: Australian dollar gains ground amid steady US dollar

  • Speaking before a parliamentary committee, Stephen Kennedy, head of Australia's Treasury, noted that services inflation was lagging behind goods inflation. He mentioned that services inflation had probably peaked and was expected to decline over the next two years, and he saw no evidence of a spiral in wages and prices.
  • Reserve Bank of Australia (RBA) Governor Michele Bullock said the central bank could consider starting to cut rates even before inflation slows to 2.5%. However, she warned that the RBA remains open to the prospect of further rate hikes.
  • The RBA's head of economic analysis, Marion Kohler, highlighted the uncertainty surrounding current inflation projections for the Australian economy. However, it expects price growth to eventually return to a more moderate level by 2025.
  • China's headline CPI fell 0.8%, beating expectations for a 0.5% decline and the previous decline of 0.3%.
  • The headline US consumer price index (CPI) rose 3.1% in January, beating the 2.9% expected but lower than the previous rate of 3.4%.
  • Inflation in the US increased by 0.3% month-on-month, against expectations of maintaining the previous value of 0.2%.
  • US Core CPI (YoY) remained consistent at 3.9% versus market expectations for a decline to 3.7% in January.
  • US core (MoM) inflation rose 0.4% versus an expected 0.3%, unchanged in January.

Technical analysis: The Australian dollar is moving above the key level of 0.6450

The Australian dollar traded near 0.6450 on Wednesday after another psychological support level of 0.6400. A break below the latter could push the AUD/USD pair closer to the major support level at 0.6350. On the upside, key resistance appears at the psychological level of 0.6500. A breakthrough through this psychological barrier could make an impact AUD/USD pair reach 14-day EMA at 0.6523 followed by 23.6% Fibonacci retracement level at 0.6543 and major level at 0.6550.

AUD/USD: Daily chart

Today's price in Australian dollars

The table below shows today's percentage change in the Australian Dollar (AUD) against the major listed currencies. The Australian dollar was strongest against the pound sterling.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar 0.03% 0.25% -0.10% -0.36% -0.20% -0.41% -0.10%
euros -0.02% 0.22% -0.12% -0.38% -0.23% -0.43% -0.11%
GBP -0.24% -0.22% -0.34% -0.59% -0.44% -0.65% -0.33%
CAD 0.10% 0.12% 0.33% -0.25% -0.10% -0.31% 0.00%
AUD 0.35% 0.38% 0.58% 0.26% 0.15% -0.05% 0.26%
JPY 0.20% 0.21% 0.43% 0.11% -0.17% -0.21% 0.10%
NZD 0.41% 0.42% 0.66% 0.31% 0.06% 0.21% 0.34%
CHF 0.10% 0.12% 0.33% 0.00% -0.25% -0.10% -0.30%

The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will be EUR (base)/JPY (rate).

Frequently asked questions about the Australian dollar

One of the most important factors for the Australian dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). As Australia is a resource-rich country, another key factor is the price of its biggest export, iron ore. The health of the Chinese economy, its biggest trading partner, is a factor, as is inflation in Australia, its growth rate and the Trade Balance. Market sentiment – ​​whether investors are taking on riskier assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk-on positive for the AUD.

The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the interest rates at which Australian banks can lend to each other. This affects the level of interest rates in the economy as a whole. The main aim 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 vice versa for relatively low ones. The RBA can also use quantitative easing and tightening to influence credit conditions, the former AUD-negative and the latter AUD-positive.

China is Australia's largest trading partner, so the health of the Chinese economy has a big impact on the value of the Australian dollar (AUD). When China's economy is doing well, it buys more raw materials, goods and services from Australia, raising demand for the AUD and increasing its value. The opposite is the case when China's economy is not growing as fast as expected. Therefore, positive or negative surprises in Chinese growth data often have a direct impact on the Australian dollar and its pairs.

Iron ore is Australia's largest export, accounting for $118 billion a year in 2021 figures, with China as the primary destination. So the price of iron ore can be a driver for the Australian dollar. Generally, if the price of iron ore rises, so does the AUD, as aggregate demand for the currency rises. The opposite case is a fall in the price of iron ore. Higher iron ore prices also tend to lead to a greater likelihood of a positive trade balance for Australia, which is also positive for the AUD.

Another factor that can affect the value of the Australian dollar is the trade balance, which is the difference between what a country earns from exports and what it pays for imports. If Australia produces highly sought-after exports, then its currency will gain in value purely from the excess demand created by foreign buyers trying to buy its exports over what it spends on buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the trade balance is negative.

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