- The Australian Dollar moves sideways as a Reuters poll indicates no rate change in the June meeting.
- 90% of economists anticipate stable rates in Q3, with a potential 25 basis-point reduction by the end of 2024.
- The US Dollar (USD) remains stable due to the hawkish stance of the Fed.
The Australian Dollar (AUD) consolidates, possibly driven by improved risk appetite on Friday. This optimism stems from a Reuters poll of 43 economists, unanimously predicting that the Reserve Bank of Australia (RBA) will maintain current interest rates in June. A significant 90% of economists anticipate stable interest rates in the next quarter, with a potential 25 basis-point reduction to 4.10% projected by the end of 2024. Furthermore, 63% of economists foresee interest rates declining to 4.10% or below by year-end, while a minority (35%) expect no change.
The US Dollar (USD) has maintained stability following gains from the previous session despite the release of economic data showing a softer US Producer Price Index (PPI) and higher-than-expected Initial Jobless Claims. Federal Open Market Committee (FOMC) policymakers have revised their outlook, now anticipating only one rate cut for the year, down from the three cuts forecasted in March. This adjustment is bolstering the US Dollar’s (USD) resilience and exerting pressure on the AUD/USD pair.
Investors are awaiting the release of the preliminary US Michigan Consumer Sentiment index on Friday. This key indicator will offer additional insights into consumer confidence and the broader economic outlook.
Daily Digest Market Movers: Australian Dollar may limit its downside due to hawkish RBA
- US Initial Jobless Claims for the week ending June 7 showed a significant increase, with the number of claims rising by 13,000 to 242,000. This figure surpassed market expectations, which were set at 225,000, marking the highest level of jobless claims since August 2023.
- US Producer Price Index (PPI) came in weaker than expected, increasing 2.2% YoY in May, compared to the 2.3% rise in April (revised from 2.2%). Meanwhile, the core PPI figure rose 2.3% YoY in May, below the consensus and April’s reading of 2.4%.
- Australia’s Employment Change showed on Thursday that the number of employed people increased by 39.7K in May, exceeding the expected 30.0K increase and the previous 38.5K rise. Meanwhile, the Unemployment Rate came in at 4.0%, below April’s 4.1% rate as expected.
- At its June meeting on Wednesday, the Federal Open Market Committee (FOMC) kept its benchmark lending rate unchanged within the range of 5.25%–5.50%, marking the seventh consecutive meeting without a rate change, as widely anticipated. In a press conference post Fed decision, Fed Chair Jerome Powell noted that the restrictive stance on monetary policy is having the effect on inflation that the central bank had expected. Additionally, FOMC policymakers expect just one rate cut this year, down from three in March.
- On Tuesday, National Australia Bank (NAB) Chief Economist Alan Oster commented, “There are warning signs on the outlook for growth but at the same time reasons to be very wary about the inflation outlook, and they expect the RBA to keep rates on hold for some time yet as they navigate through these contrasting risks,” as per the official transcript.
- Last week, RBA Governor Michele Bullock indicated that the central bank is prepared to increase interest rates if the Consumer Price Index (CPI) does not return to the target range of 1%-3%, according to NCA NewsWire.
Technical Analysis: Australian Dollar remains below 0.6650
The Australian Dollar trades around 0.6630 on Friday. Analysis of the daily chart reveals a neutral bias for the AUD/USD pair as it consolidates within a rectangle formation. The 14-day Relative Strength Index (RSI) has recently crossed above the 50 level, indicating a potential bullish bias emerging.
In terms of immediate levels, the AUD/USD pair finds support around the 50-day Exponential Moving Average (EMA) at 0.6605, with further support at the lower boundary of the rectangle formation near 0.6585.
Looking upwards, the AUD/USD pair could test resistance near the upper boundary of the rectangle formation around 0.6700, followed by the high from May at 0.6714.
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 weakest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | 0.01% | -0.02% | 0.04% | 0.45% | 0.12% | 0.02% | |
| EUR | 0.02% | 0.03% | 0.00% | 0.05% | 0.46% | 0.14% | 0.03% | |
| GBP | -0.02% | -0.03% | -0.03% | 0.02% | 0.43% | 0.11% | -0.01% | |
| CAD | 0.01% | 0.00% | 0.04% | 0.05% | 0.46% | 0.14% | 0.03% | |
| AUD | -0.04% | -0.05% | -0.01% | -0.06% | 0.42% | 0.09% | -0.02% | |
| JPY | -0.46% | -0.47% | -0.43% | -0.48% | -0.43% | -0.33% | -0.44% | |
| NZD | -0.10% | -0.14% | -0.10% | -0.15% | -0.09% | 0.33% | -0.12% | |
| CHF | -0.02% | -0.03% | 0.01% | -0.03% | 0.02% | 0.44% | 0.11% |
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.
