News & Analyses

Australian Dollar loses ground on softer monthly Aussie CPI, improved US Dollar

  • Australian Dollar extends its losses following the softer-than-expected Aussie CPI.
  • Australia’s Monthly Consumer Price Index (YoY) rose by 3.4%, slightly below the expected 3.5%.
  • US Dollar gains ground on risk aversion ahead of Personal Consumption Expenditures.

The Australian Dollar (AUD) extends its losses for the second successive session on Wednesday. The AUD/USD pair experiences losses following softer-than-expected Aussie consumer prices, potentially prompting the Reserve Bank of Australia (RBA) to consider a dovish stance on the interest rate trajectory. This outlook is exerting downward pressure on the AUD.

Australia’s Monthly Consumer Price Index (YoY) rose by 3.4% in February, consistent with previous levels but slightly below the anticipated 3.5%. Still, the latest reading pointed to the lowest since November 2021. The AUD has faced downward pressure following the release of Westpac Consumer Confidence on Tuesday, which dipped 1.8% to 84.4 in March 2024 from February’s 86.0, easing from 20-month highs.

The US Dollar Index (DXY) saw its second consecutive day of gains amid a risk-off sentiment, driven by anticipation surrounding the upcoming release of US Personal Consumption Expenditures (PCE) scheduled for Friday. However, the decline in US Treasury yields may be attributed to the expectations surrounding the US Federal Reserve (Fed) regarding potential rate cuts. This sentiment could potentially limit the advances of the US Dollar.

Daily Digest Market Movers: Australian Dollar depreciates on softer consumer prices

  • Australia’s Westpac Leading Index (MoM) increased by 0.1% in February, against the previous decline of 0.09%.
  • Australia’s government has pledged to support a minimum wage increase aligned with inflation this year, recognizing the ongoing challenges low-income families face amid rising living costs.
  • According to a Bloomberg survey of economists, the consensus expectation is for the People’s Bank of China (PBoC) to implement two additional Reserve Requirement Ratio (RRR) cuts in 2024, amounting to a total reduction of 50 basis points.
  • Chinese President Xi Jinping is scheduled to meet with US business leaders. This meeting serves as a follow-up to his November dinner with US investors in San Francisco.
  • Atlanta Fed President Raphael Bostic expressed his expectation for just one rate cut this year, cautioning that reducing rates prematurely could lead to greater disruption.
  • Chicago Fed President Austan Goolsbee aligns with the majority of the board, anticipating three cuts. However, Goolsbee mentioned the necessity for further evidence indicating a decrease in inflation before proceeding with rate cuts.
  • US Durable Goods Orders increased by 1.4% in February, against the 1.3% expected and previous decline of 6.9%.
  • US Durable Goods Orders ex Defense rose by 2.2% in February, compared to the expected 1.1% and 7.9% previous decline.
  • US Housing Price Index (MoM) decreased by 0.1% in January, against the December’s increase of 0.1%.

Technical Analysis: Australian Dollar falls to near 0.6520 followed by March’s low

The Australian Dollar trades near 0.6520 on Wednesday. A notable support level is positioned at the psychological mark of 0.6500, followed by March’s low at 0.6477. If the AUD/USD pair breaks below this level, it could test the major support of the 0.6450 level. On the upside, immediate resistance may be encountered around the 23.6% Fibonacci retracement level of 0.6541. This area is aligned with the major barrier of 0.6550 and the 21-day Exponential Moving Average (EMA) at 0.6553.

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 US Dollar.

USD   0.05% 0.12% 0.11% 0.31% 0.18% 0.24% 0.03%
EUR -0.05%   0.05% 0.07% 0.26% 0.18% 0.20% -0.02%
GBP -0.12% -0.08%   -0.01% 0.19% 0.14% 0.11% -0.10%
CAD -0.11% -0.06% 0.02%   0.20% 0.07% 0.13% -0.09%
AUD -0.31% -0.27% -0.20% -0.21%   -0.14% -0.07% -0.29%
JPY -0.18% -0.14% -0.07% -0.08% 0.12%   -0.01% -0.21%
NZD -0.23% -0.19% -0.14% -0.12% 0.07% 0.01%   -0.22%
CHF -0.02% 0.02% 0.09% 0.09% 0.28% 0.21% 0.22%  

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).


Australian Dollar FAQs

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate, and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk-on positive for AUD.

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods, and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive for the AUD.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought-after exports, then its currency will gain in value purely from the surplus demand created by foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.


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