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Australian Dollar extends gains on upbeat CPI figures, tepid US Dollar – Crypto News
- The Australian Dollar appreciates after the release of stronger-than-expected CPI data released on Wednesday.
- The Australian Dollar receives upward support due to the improved risk appetite, along with the higher ASX 200 Index.
- The US Dollar faced challenges after the downbeat PMI data was released on Tuesday.
The Australian Dollar (AUD) extends its winning streak for the third successive day after the release of the better-than-expected Consumer Price Index (CPI) data on Wednesday. The upbeat inflation figures have the potential to fuel a hawkish sentiment regarding the Reserve Bank of Australia’s (RBA) monetary policy outlook. This has contributed to the strength of the Australian Dollar (AUD), thereby supporting the AUD/USD pair.
The Australian Dollar (AUD) advances, tracking the higher ASX 200 Index, with notable contributions from the technology and healthcare sectors. Australian stocks are mirroring the positive momentum observed on Wall Street, driven by strong corporate earnings reports that have bolstered market sentiment.
The US Dollar Index (DXY), gauging the US Dollar (USD) against six major currencies, experiences downward pressure amid a decrease in US Treasury yields. Furthermore, disappointing Purchasing Managers Index (PMI) data from the United States (US) weighed on the US Dollar (USD), thereby supporting the AUD/USD pair. Nevertheless, inflation reports indicate that business activity in the United States continued to expand in April, albeit at a slower pace compared to March.
Daily Digest Market Movers: Australian Dollar appreciates on upbeat consumer inflation data
- Australia’s Consumer Price Index (CPI) rose by 1.0% QoQ in the first quarter of 2024, against the expected 0.8% and 0.6% prior. CPI (YoY) increased by 3.6% compared to the forecasted 3.4% for Q1 and 4.1% prior.
- Australia’s Monthly Consumer Price Index (YoY) rose by 3.5% in March, against the market expectations and the previous reading of 3.4%.
- On Tuesday, the US preliminary S&P Global Composite PMI fell to 50.9 in April from the previous reading of 52.1. Meanwhile, the Manufacturing PMI dropped to 49.9 from 51.9 in the previous reading, weaker than the estimation of 52.0. The Services PMI decreased to 50.9, compared to 51.7 prior, worse than the 52.0 expected.
- Australia’s Judo Bank Composite Purchasing Managers Index (PMI) released on Tuesday, showed a surge to a 24-month high of 53.6 in April, marking an improvement from the previous month’s 53.3. Manufacturing PMI rose to an eight-month high of 49.9 in April, compared to March’s 47.3. Services PMI declined to a 2-month low of 54.2 compared to the previous reading of 54.4.
- The China Securities Journal reported on Tuesday that the People’s Bank of China (PBoC) will decrease the Medium-term Lending Facility (MLF) rate, aiming to lower funding costs. The next MLF rate setting is scheduled for May 15. This decision could potentially influence the Australian market, given the close trade relationship between the two countries.
- The likelihood of the Federal Reserve’s (Fed) interest rates remaining unchanged in the June meeting has risen to 84.6%, up from the previous week’s 82.7%, according to the CME FedWatch Tool.
Technical Analysis: Australian Dollar moves above the psychological level of 0.6500
The Australian Dollar trades around 0.6520 on Wednesday. The pair has breached into the symmetrical triangle, indicating a shift towards bullish sentiment. Furthermore, the 14-day Relative Strength Index (RSI) is above the 50-level, supporting this bullish outlook.
The AUD/USD pair may aim for the psychological level of 0.6600 and attempt to reach the upper boundary of the symmetrical triangle near 0.6639, potentially reinforcing the bullish sentiment.
In terms of the downside, immediate support is anticipated around the psychological level of 0.6500, aligned with the lower boundary of the triangle. A breach below this channel could exert downward pressure on the AUD/USD pair, with the next significant support level at 0.6456. Further support is located at April’s low of 0.6362.
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 strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.08% | -0.05% | -0.01% | -0.45% | 0.04% | -0.13% | 0.00% | |
| EUR | 0.07% | 0.02% | 0.06% | -0.36% | 0.11% | -0.07% | 0.04% | |
| GBP | 0.05% | -0.02% | 0.05% | -0.38% | 0.09% | -0.08% | 0.04% | |
| CAD | 0.01% | -0.06% | -0.05% | -0.43% | 0.05% | -0.13% | -0.01% | |
| AUD | 0.45% | 0.34% | 0.38% | 0.41% | 0.41% | 0.30% | 0.42% | |
| JPY | -0.05% | -0.13% | -0.08% | -0.04% | -0.48% | -0.13% | -0.05% | |
| NZD | 0.16% | 0.07% | 0.10% | 0.12% | -0.30% | 0.13% | 0.13% | |
| CHF | 0.01% | -0.04% | -0.04% | 0.00% | -0.42% | 0.07% | -0.12% |
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).
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
