- Australian Dollar exhibits sideways movement with a bias to recover recent losses.
- Australia’s S&P/ASX 200 Index mirrors the gains seen on Wall Street overnight, avoiding the upbeat US Inflation data.
- US CPI YoY and MoM rose by 3.2% and 0.4%, respectively, in February.
The Australian Dollar (AUD) consolidates, with a sentiment indicating a potential to recover recent losses on Wednesday. Despite the S&P/ASX 200 Index rising for the second consecutive day, tracking gains on Wall Street overnight, lower commodity prices could exert pressure on the Aussie Dollar. Investor sentiment remains cautiously optimistic following the release of upbeat Consumer Price Index (CPI) data from the United States (US).
Australian Dollar suffered losses against the US Dollar (USD) on Tuesday, driven by a stronger-than-expected CPI report that dampened hopes of a near-term rate cut by the Federal Reserve (Fed). This strengthened the Greenback, potentially creating headwinds for the AUD/USD pair. Traders are likely to shift their focus to the US Core Producer Price Index (PPI) and Retail Sales data scheduled for release on Thursday.
Daily Digest Market Movers: Australian Dollar remains subdued on risk-off sentiment
- Australia’s NAB Business Confidence Index decreased to 0 in February, from 1 in the previous month.
- Australia’s NAB Business Conditions Index improved to 10 from the previous reading of 7 (revised from 6).
- Sarah Hunter, Assistant Governor (Economics) at the Reserve Bank of Australia (RBA), addressed a panel at the AFR Business Summit on Tuesday, discussing fourth-quarter GDP in line with forecasts. Hunter mentioned that recent inflation data also matched expectations, with inflation remaining the primary hindrance to household consumption.
- CIBC discusses the latest US CPI data for February, noting that while the report exceeds consensus expectations, it does not warrant alarm regarding inflation trends.
- According to the CME FedWatch Tool, the probability of a rate cut in March has decreased to 1.0%, while in May it stands at 15.6%. In June, the likelihood of a rate cut is estimated to be 66.6%.
- US CPI (YoY) came in at 3.2% in February, exceeding estimates of 3.1% and above January’s 3.1%. The monthly index printed 0.4% as expected above 0.3% prior.
- US Core CPI increased by 3.8% year-over-year, above the expected 3.7% but below the previous 3.9% reading. While MoM remained consistent at 0.4% against the expected 0.3%.
- The Monthly Budget Statement printed a deficit of $296 billion in February, below the expected deficit of $299 billion. However, it has sharply increased from the previous deficit of $22 billion.
- US Nonfarm Payrolls increased by 275K in February, surpassing January’s figure of 229K and beating expectations of 200K.
- US Average Hourly Earnings (YoY) grew by 4.3%, falling slightly below February’s estimated and previous reading of 4.4%. Monthly, there was an increase of 0.1%, which was lower than the anticipated 0.3% and the previous month’s 0.5%.
Technical Analysis: Australian Dollar tests the psychological support of 0.6600
The Australian Dollar remains positioned above the psychological support of 0.6600 on Wednesday. A breach below this level might propel the AUD/USD pair toward the vicinity of the nine-day Exponential Moving Average (EMA) at 0.6584, coinciding with the 38.2% Fibonacci retracement level of 0.6581. To the upside, the AUD/USD pair could encounter significant resistance at the major level of 0.6650, followed by the previous week’s high of 0.6667. A breakthrough above the latter could provide further momentum for the pair to challenge the psychological barrier of the 0.6700 level.
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 Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.02% | 0.02% | -0.08% | -0.19% | -0.20% | 0.03% | |
| EUR | -0.01% | 0.01% | 0.02% | -0.08% | -0.20% | -0.22% | 0.02% | |
| GBP | -0.02% | -0.01% | 0.01% | -0.10% | -0.21% | -0.23% | 0.01% | |
| CAD | -0.03% | -0.02% | -0.01% | -0.11% | -0.21% | -0.23% | 0.01% | |
| AUD | 0.07% | 0.09% | 0.09% | 0.11% | -0.11% | -0.14% | 0.08% | |
| JPY | 0.18% | 0.21% | 0.22% | 0.21% | 0.14% | -0.03% | 0.21% | |
| NZD | 0.21% | 0.21% | 0.23% | 0.23% | 0.13% | 0.02% | 0.24% | |
| CHF | -0.03% | -0.02% | -0.01% | 0.00% | -0.10% | -0.21% | -0.24% |
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).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.