- The Australian Dollar extends losses due to risk aversion sentiment on Tuesday.
- Australia’s Consumer Confidence fell 0.3% MoM in May, marking the third consecutive month of decline.
- RBA Meeting Minutes showed that it was challenging to rule in or rule out future changes in the cash rate.
- The higher US Treasury yields contributed to the support of the US Dollar.
The Australian Dollar (AUD) continues to lose ground on Tuesday, possibly driven by the risk aversion sentiment. However, the AUD/USD pair edged higher after the release of Westpac Consumer Confidence during the early Asian hours. The index fell 0.3% month-over-month in May, compared to a 2.4% decline in April. It was the third straight month of drop but the softest pace in this sequence.
The Australian Dollar could receive support as China announced a broad package to support its struggling property market, including the relaxation of mortgage rules and urging local governments to buy unsold homes. This could have lifted sentiment in Aussie markets as both nations are close trade partners.
The US Dollar (USD) trades steady amid the absence of top-tier economic data releases from the United States (US). The higher US Treasury yields contribute to the support of the Greenback. The US Federal Reserve (Fed) is cautious about inflation and the potential for rate cuts in 2024.
Daily Digest Market Movers: Australian Dollar depreciates after RBA Minutes
- Minutes from the RBA meeting in May 2024 showed that the board considered raising rates but ultimately judged the case for maintaining a steady policy to be stronger. Policymakers agreed that it was challenging to either rule in or rule out future changes in the cash rate. They noted that the flow of data had increased the risk of inflation remaining above the target for an extended period.
- The ASX 200 dropped to around 7,850 on Tuesday following a mixed session on Wall Street. Declines in James Hardie and Sonic Healthcare offset gains in the tech sector. However, mining giants saw an uptick, driven by higher iron ore prices due to Beijing’s measures to support the struggling property sector and a surge in copper prices.
- In an interview with Bloomberg, Loretta Mester, President of the Federal Reserve Bank of Cleveland, stated that she no longer believes three rate cuts in 2024 are appropriate. Mester highlighted that inflation risks are skewed to the upside and emphasized that there is no harm in spending additional time gathering data on inflation, given the strength of the economy.
- According to the CME FedWatch Tool, the likelihood of the Federal Reserve delivering a 25 basis-point rate cut in September has slightly increased to 49.6%, up from 48.6% a week ago.
- On Monday, the Chinese Commerce Ministry announced a prohibition on General Atomics Aeronautical Systems, a US company, from engaging in import and export activities related to China. This decision comes amid ongoing trade tensions between the United States and China. Any economic change in the Chinese economy could catalyze the Australian market as both nations are close trade partners.
- Federal Reserve Board of Governors member Michelle Bowman said on Friday that the progress on inflation might not be as steady as many had hoped. Bowman indicated that the decline in inflation observed in the latter half of last year was temporary and that there has been no further progress on inflation this year.
Technical Analysis: Australian Dollar could test the psychological level of 0.6700
The Australian Dollar trades around 0.6670 on Tuesday. The daily chart for AUD/USD showed an ascending triangle formation. Additionally, the 14-day Relative Strength Index (RSI) indicated a bullish sentiment, holding above the 50 mark.
The AUD/USD pair could test the upper limit of the ascending triangle, near the four-month peak of 0.6714. A breakout above this level might lead the pair to explore the area around the significant barrier at 0.6750.
On the downside, potential support is at the nine-day Exponential Moving Average (EMA) at 0.6651, aligned with the key level of 0.6650. A break below this support could push the AUD/USD pair toward the lower boundary of the ascending triangle around 0.6610 and the psychological level of 0.6600.
AUD/USD: Daily Chart
Australian Dollar price today
The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the weakest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.03% | 0.02% | 0.09% | 0.19% | 0.03% | 0.11% | 0.09% | |
| EUR | -0.04% | -0.02% | 0.04% | 0.16% | 0.00% | 0.07% | 0.05% | |
| GBP | -0.03% | 0.02% | 0.07% | 0.18% | 0.02% | 0.09% | 0.07% | |
| CAD | -0.09% | -0.06% | -0.07% | 0.12% | -0.05% | 0.02% | 0.01% | |
| AUD | -0.19% | -0.18% | -0.19% | -0.13% | -0.17% | -0.10% | -0.12% | |
| JPY | -0.04% | 0.01% | 0.00% | 0.07% | 0.17% | 0.08% | 0.06% | |
| NZD | -0.11% | -0.07% | -0.09% | -0.02% | 0.08% | -0.07% | 0.00% | |
| CHF | -0.09% | -0.05% | -0.07% | 0.00% | 0.11% | -0.06% | 0.02% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.