- Australian Dollar appreciates as the ASX 200 Index continues to gain ground on Thursday.
- Australia’s Employment Change came in at -6.6K and the Unemployment Rate increased by 3.8% in March.
- US President Joe Biden calls for tripling the existing 7.5% tariff rate on Chinese steel and aluminum.
- The decline in the US Treasury yields contributes to pressure to undermine the US Dollar.
The Australian Dollar (AUD) continues to gain ground on the second consecutive day on Thursday. The decline in the US Dollar (USD) contributes support for the AUD/USD pair. However, the mixed Australian employment data appears to exert downward pressure on the AUD.
The Australian Dollar gains momentum as the ASX 200 Index continues to climb on Thursday. The domestic equity market is bolstered by gains in mining stocks, supported by firmer metals prices. This positive momentum persists despite US stocks extending losses overnight amidst concerns that the Federal Reserve (Fed) may delay rate cuts further into the future.
The US Dollar Index (DXY) loses ground. primarily influenced by subdued US Treasury yields. This correction in the US Dollar is further reinforced by renewed selling pressure and an overall risk-on sentiment in the market. Investors watch for the release of weekly Initial Jobless Claims and Existing Home Sales later on Thursday, which could provide further insight into the state of the US economy and potentially impact the direction of the US Dollar.
Daily Digest Market Movers: Australian Dollar extends gains amid mixed labor data
- Australia’s Employment Change posted a reading of -6.6K for March, against the expected 7.2K and 117.6K prior.
- Australia’s Unemployment Rate increased by 3.8% in March, lower than the expected 3.9% but higher than the previous reading of 3.7%.
- US President Joe Biden spoke at the heart of the American steel industry in Pittsburgh on Wednesday, emphasizing the need for increased pressure on the Chinese steel sector. He has directed US Trade Representative Katherine Tai to consider tripling the current 7.5% tariff rate on Chinese steel and aluminum, as reported by CBS News.
- Federal Reserve Bank of Cleveland President Loretta Mester, speaking on Wednesday, acknowledged that inflation has exceeded expectations, and the Fed needs further assurance before confirming the sustainability of 2% inflation. She also stated that monetary policy is well-positioned, with the possibility of a rate cut if labor market conditions worsen.
- Fed Governor Michelle Bowman commented on Wednesday that progress in inflation is slowing, with a potential stall. Bowman also noted that monetary policy is currently restrictive, and its sufficiency will be determined over time.
- The Federal Reserve’s Beige Book survey of regional business contacts indicates that the US economy has “expanded slightly” since late February. Furthermore, firms reported facing increased challenges in passing on higher costs.
- US Building Permits (MoM) fell to 1.458 million in March, compared to the expected 1.514 million and 1.523 million prior. Housing Starts declined to 1.321 million MoM from 1.549 million, falling short of the expected 1.480 million.
Technical Analysis: Australian Dollar hovers around the major level of 0.6450
The Australian Dollar traded around 0.6440 on Thursday. The 14-day Relative Strength Index (RSI) suggests a bearish sentiment for the AUD/USD pair as it remains below the 50 level. Key resistance for the pair is anticipated at the 23.6% Fibonacci retracement level of 0.6449, coinciding with the significant level of 0.6450. A breach above this level could strengthen the pair’s momentum, potentially testing the nine-day Exponential Moving Average (EMA) at 0.6475, followed by the psychological barrier of 0.6500. On the downside, notable support is identified at the psychological level of 0.6400. A breach below this level might increase downward pressure on the AUD/USD pair, potentially leading it towards the major support level at 0.6350.
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 strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.08% | -0.10% | -0.12% | -0.18% | -0.06% | -0.18% | -0.07% | |
| EUR | 0.07% | -0.02% | -0.03% | -0.10% | 0.03% | -0.11% | -0.03% | |
| GBP | 0.10% | 0.03% | -0.02% | -0.08% | 0.05% | -0.10% | 0.02% | |
| CAD | 0.12% | 0.03% | 0.01% | -0.06% | 0.06% | -0.07% | 0.03% | |
| AUD | 0.21% | 0.13% | 0.08% | 0.10% | 0.16% | 0.03% | 0.12% | |
| JPY | 0.06% | -0.02% | -0.05% | -0.07% | -0.11% | -0.12% | -0.03% | |
| NZD | 0.19% | 0.11% | 0.09% | 0.08% | 0.01% | 0.14% | 0.11% | |
| CHF | 0.10% | 0.03% | 0.00% | -0.01% | -0.10% | 0.05% | -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.
