Australian Dollar grapples to snap its losing streak after moderate Aussie economic data – Crypto News – Crypto News
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Australian Dollar grapples to snap its losing streak after moderate Aussie economic data – Crypto News

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  • Australian Dollar continues its losing streak as the US Dollar improves on risk aversion.
  • Australian Consumer Inflation Expectations and Unemployment Rate remained consistent at 4.5% and 3.9%, respectively.
  • The solid US Retail Sales data reinforced the strength of the Greenback.
  • Traders’ expectations have been trimmed for the Fed’s first rate cut in March.

The Australian Dollar (AUD) extends its losing streak on Thursday that began on January 11. The robust economic data emanating on Wednesday from the United States (US) played a role in diminishing the strength of the AUD/USD pair. Furthermore, as the US military executed another series of strikes on Houthi targets in Yemen, the heightened geopolitical tensions further bolstered the inclination towards risk aversion. This, in turn, supports the demand for the US Dollar (USD) over its counterparts, including the Australian Dollar (AUD).

Australia’s moderate data released on Thursday seem to fail to provide any support for the Australian Dollar. Consumer Inflation Expectations remained steady at 4.5% in January, while the seasonally adjusted Unemployment Rate held firm at 3.9% in line with expectations for December. However, the Employment Change data revealed a decline, with the number of employed individuals decreasing by 65.1K, contrary to the anticipated increase of 17.6K.

The US Dollar Index (DXY) gains ground on upbeat US Treasury yields, which could be attributed to the better-than-expected US economic data. US Retail Sales (MoM) rose by 0.6% in December, exceeding the market consensus of 0.4 and 0.3% prior.

US Retail Sales Control Group improved to 0.8% from the previous reading of 0.5%. Moreover, Retail Sales ex Autos (MoM), excluding the key sector of motor vehicles and parts, grew by 0.4% as compared to the market anticipation of remaining consistent at 0.2%. Traders will likely watch the US housing data on Thursday.

The US Dollar cheers the investors’ sentiment as they have scaled back their expectations for the Federal Reserve’s (Fed) first rate cut in March. The probability of a rate cut has decreased to 57%, a significant drop from over 70%.

Daily Digest Market Movers: Australian Dollar continues to lose ground on risk aversion

  • Australia’s Consumer Confidence declined by 1.3% in January as compared to the previous increase of 2.7%.
  • Australian TD Securities inflation increased by 5.2% YoY in December from 4.4% in November.
  • Australia’s job advertisements improved by 0.1% in December, swinging from the previous decline of 4.6%.
  • China’s annual Gross Domestic Product (GDP) grew by 5.2% against the 5.3% expected in the fourth quarter.
  • Chinese December’s Industrial Production (YoY) increased by 6.8%. which was expected to remain consistent at 6.6%.
  • China’s Retail Sales year-over-year came at 7.4%, falling short of the market consensus of 8.0%.
  • China’s Premier Li Qiang stated on Tuesday that China’s economy grew by approximately 5.2% in 2023.
  • Federal Reserve Governor Christopher Waller cautioned that, despite positive developments in the inflation outlook, the central bank is not rushing to outline plans for rate cuts.
  • Atlanta Fed President Raphael Bostic also suggested over the weekend that premature interest rate cuts could lead to inflation fluctuations. Bostic emphasized that the deceleration of inflation towards the central bank’s 2.0% target was expected to slow down in the coming months.
  • US NY Empire State Manufacturing Index saw a significant decline, dropping to -43.7 in January, well below the expected improvement to -5.

Technical Analysis: Australian Dollar hovers around the major level at 0.6550

The Australian Dollar trades near 0.6560 on Thursday followed by the immediate support level at 0.6550. A break below the latter could influence the AUD/USD pair to navigate the region around the psychological level at 0.6500 followed by the 61.8% Fibonacci retracement level at 0.6495. On the upside, the psychological resistance could be at 0.6600 level. A break above the barrier could push the AUD/USD pair to approach the major level at 0.6650 followed by the 14-day Exponential Moving Average (EMA) at 0.6659. If the pair surpasses the 14-day EMA, it could attempt to test the psychological level at 0.6700.

AUD/USD: Daily Chart

Australian Dollar price this week

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the weakest against the US Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.46% 0.39% 0.63% 2.00% 1.98% 1.72% 1.27%
EUR -0.47%   -0.08% 0.16% 1.55% 1.52% 1.27% 0.79%
GBP -0.38% 0.08%   0.24% 1.61% 1.61% 1.35% 0.88%
CAD -0.63% -0.17% -0.24%   1.38% 1.37% 1.10% 0.65%
AUD -2.03% -1.54% -1.62% -1.38%   0.01% -0.26% -0.73%
JPY -2.02% -1.55% -1.76% -1.38% 0.01%   -0.25% -0.73%
NZD -1.75% -1.29% -1.37% -1.13% 0.27% 0.24%   -0.47%
CHF -1.28% -0.81% -0.89% -0.65% 0.74% 0.73% 0.39%  

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.

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