The Australian Dollar Faces Downward Pressure Amid Economic Uncertainty in China
- RBA’s Hunter Highlights Challenges Despite Anchored Inflation Expectations
- Strong US Dollar Strengthens on Positive Jobs and Inflation Data
Despite hawkish remarks from Reserve Bank of Australia (RBA) Deputy Governor Sarah Hunter, the Australian Dollar (AUD) continues its downward trend against the US Dollar (USD) for the third straight day. Hunter emphasized the central bank’s dedication to inflation control, acknowledging the challenges posed by persistent price growth, even as inflation expectations remain stable.
The AUD’s decline can be attributed to economic uncertainties in China, its largest trading partner. Additionally, China’s fiscal stimulus plan announcement failed to boost market sentiment significantly, leaving investors wary about the plan’s magnitude and effectiveness.
On the other hand, the US Dollar (USD) remains robust, bolstered by strong Employment and Consumer Price Index (CPI) data that have tempered expectations of aggressive Federal Reserve (Fed) easing. Market participants now anticipate a total of 125 basis points in rate cuts over the next year.
Key Market Movements Impacting the Australian Dollar
- The CME FedWatch Tool indicates a 94.1% probability of a 25-basis-point rate cut in November, with no expectations for a larger reduction.
- Australia’s Westpac Leading Index stagnated in September for the sixth consecutive month.
- Federal Reserve Bank of Atlanta President Raphael Bostic projects only one more 25-basis-point rate cut this year, deviating from consensus expectations.
- Consumer Confidence in Australia remains subdued, marking a long-term trend of below-average sentiment.
- Fed Bank of Minneapolis President Neel Kashkari reaffirms the Fed’s data-dependent approach, citing a robust US economy.
- Expectations of an RBA rate cut by the end of 2024 weigh on the AUD, as highlighted by the Commonwealth Bank of Australia’s report.
- Geopolitical tensions escalate as China conducts military drills near Taiwan, raising concerns in the region.
- China’s economic data shows mixed results, with CPI unchanged in September and PPI declining more than anticipated.
Technical Insights: Australian Dollar’s Bearish Momentum
Amidst the AUD/USD pair hovering around 0.6680, technical analysis reveals a bearish bias. The pair is trending lower within a descending channel on the daily chart, supported by the 14-day Relative Strength Index (RSI) below 50, indicating ongoing bearish momentum.
Downside targets for the AUD/USD pair include the recent low of 0.6622, with potential further downside towards 0.6600. Conversely, breaking above 0.6720 could lead to resistance levels at 0.6738 and 0.6800.
Current Australian Dollar Performance Against Major Currencies
Australian Dollar Price Today
The table below illustrates the percentage change of the Australian Dollar (AUD) against major currencies, highlighting its weakness against the Japanese Yen.
The heat map reflects the percentage changes between major currencies, showcasing the AUD’s performance against each currency.
RBA FAQs: Understanding the Reserve Bank of Australia
- Role of RBA in setting interest rates and managing monetary policy
- Impact of inflation on currency value in modern economic contexts
- Macroeconomic indicators influencing the Australian Dollar
- Insights on Quantitative Easing (QE) and its effects on the AUD
- Explanation of Quantitative Tightening (QT) and its implications for the Australian Dollar