Home Forex Australian dollar remains calm after muted Chinese CPI, US dollar remains steady

Australian dollar remains calm after muted Chinese CPI, US dollar remains steady

by SuperiorInvest


  • Australian dollar recovers recent losses amid steady US dollar.
  • The Australian currency is strengthened as RBA’s Bullock neither accepted nor ruled out anything on future policy action.
  • China’s CPI (YoY) fell 0.8% versus an expected 0.5% decline and a 0.3% decline previously.
  • Fed members are committed to keeping interest rates elevated until inflation returns sustainably to the 2% target.

The Australian dollar (AUD) recovered its recent losses on Thursday, supported by risk-on market sentiment. Despite the US central bank (Fed) stressing its commitment to keep interest rates elevated until inflation returns sustainably to the 2% target, the US dollar (USD) faces challenges. In addition, improved conditions in the Australian money market are providing support to the Australian dollar (AUD), strengthening it AUD/USD pair.

The Australian currency is being boosted by hawkish remarks from Reserve Bank of Australia (RBA) Governor Michele Bullock following Tuesday’s interest rate decision. The RBA decided to leave its Official Cash Rate (OCR) unchanged at 4.35%.

Governor Bullock refrained from making explicit statements about future policy measures, neither admitting nor ruling out anything. However, futures markets are currently pricing in two potential interest rate cuts RBA this year, with the first expected in September.

China’s Consumer Price Index (CPI) rose 0.3% month-on-month in January, falling short of the expected 0.4%. However, compared to the previous figure, it improved by 0.1%. Annual CPI fell 0.8%, beating expectations for a 0.5% decline and the previous decline of 0.3%. Meanwhile, the producer price index (YoY) fell 2.5%, below expectations for a 2.6% decline.

The American dollar The index (DXY) appears to be continuing its downtrend for the third session in a row, pressured by a correction in US Treasury yields. However, the Chairman of the Federal Reserve System Jerome Powell in March, it rejected the possibility of a rate cut. Traders will focus on jobs data including the US Initial on Thursday Unemployment claims for the week ending February 2.

During remarks Wednesday, Federal Reserve Governor Adriana Kugler expressed satisfaction with the significant progress in inflation and expressed optimism that progress will continue. Meanwhile, in a speech at the Boston Economic Club, Boston Fed President Susan Collins hinted at the likelihood of a rate cut later this year if the economy lives up to expectations.

Daily Digest Market Moves: Australian dollar improves amid steady US dollar

  • Australia’s December AiG Industry Index came in at -27.3 compared to -22.4 previously.
  • Australian retail sales (QoQ) improved 0.3% in the fourth quarter, compared with 0.2% growth previously.
  • Australia’s balance of trade (MoM) for January was cut to 10,959 million, compared to a revised figure of 11,764 million in December.
  • Australia’s Judo Bank Composite Purchasing Managers’ Index (PMI) improved to 49 in January from 48.1 previously. The services PMI saw an improvement, rising to 49.1 from the previous reading of 47.9.
  • China’s Caixin Services PMI eased to 52.7 in January from a previous reading of 52.9.
  • The Atlanta Fed’s wage growth tracker fell to 5.0% in January from 5.2% reported in December. This represents the slowest growth rate since December 2021, when it was 4.5%.
  • U.S. MBA mortgage applications rose to 3.7% in the week ended Feb. 2, from a 7.2% decline the previous month.
  • The US Census Bureau showed that the balance of trade in goods and services fell by an expected 62.2 billion in December. The previous decline was 61.9 billion.
  • The 10-year US Treasury note traded at an average yield of 4.093%, up from 4.024% previously.

Technical analysis: The Australian dollar is holding a position below the main barrier of 0.6550

The Australian dollar is trading around 0.6530 on Thursday, slightly below immediate resistance at 0.6550. A break above this level could potentially catalyze further upside for AUD/USD with potential targets including 23.6% Fibonacci retracement level at 0.6563 and 21-day exponential moving average (EMA) at 0.6579. On the downside, key support is expected at the psychological level of 0.6500. Other support levels include the weekly low at 0.6468, followed by a major support level at 0.6450.

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 Japanese yen.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar -0.03% -0.06% -0.09% -0.12% 0.09% -0.17% -0.09%
euros 0.03% -0.03% -0.05% -0.09% 0.12% -0.13% -0.07%
GBP 0.06% 0.03% -0.02% -0.06% 0.15% -0.10% -0.05%
CAD 0.08% 0.04% 0.02% -0.04% 0.16% -0.10% -0.02%
AUD 0.11% 0.09% 0.04% 0.04% 0.21% -0.04% 0.01%
JPY -0.08% -0.13% -0.15% -0.18% -0.20% -0.24% -0.18%
NZD 0.16% 0.12% 0.10% 0.10% 0.04% 0.25% 0.05%
CHF 0.10% 0.06% 0.04% 0.02% -0.01% 0.18% -0.06%

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 largest 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 objective 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 decrease 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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