Australian Dollar remains calm after daily losses amid a stronger US Dollar

Australian Dollar halts its winning streak on Tuesday on an improved US Dollar.
Australia’s ASX 200 index moves lower and weighs on Aussie Dollar.
PBoC maintains its one-year LPR at 3.45% but reduces the five-year LPR by 25 basis points.
Greenback gains ground on higher US Treasury yields.

The Australian Dollar (AUD) snaps a four-day winning streak on Tuesday amid an improved US Dollar (USD). Higher US Treasury yields support the Greenback, putting pressure on the AUD/USD pair. Additionally, the AUD faced downward pressure from a weaker Aussie money market. The S&P/ASX 200 index halted its winning streak, with mining and energy stocks declining amid weaker commodity prices.

Australian Dollar avoids reacting to the Reserve Bank of Australia’s (RBA) minutes from the February monetary policy meeting. The RBA Board discussed the possibility of hiking rates by 25 basis points (bps) or maintaining the status quo. While data provided the board with more confidence that inflation would return to target within a reasonable timeframe, it was noted that it would “take some time” before the board could be sufficiently confident about inflation. Therefore, the board agreed that it was appropriate not to rule out another rate hike.

The US Dollar Index (DXY) edges higher as the market returns from a holiday-extended weekend, with investors eagerly anticipating the release of the US Federal Open Market Committee (FOMC) Minutes scheduled for Wednesday. ANZ anticipates that the Federal Reserve (Fed) will commence rate cuts from July 2024. According to the CME FedWatch Tool, there is approximately a 53% probability of a 25 basis points rate cut by the US Fed in the June meeting.

Daily Digest Market Movers: Australian Dollar depreciates on improved US Dollar

The ANZ-Roy Morgan Consumer Confidence improved to 82.8 this week from 82.6 prior. Remarkably, the index has now spent a record 55 consecutive weeks below the mark of 85.
Westpac expects a resilient Australian economy supported by low unemployment and healthy corporate sector balance sheets. Westpac anticipates the RBA will maintain its current monetary policy stance throughout 2024 and adopt a less restrictive approach in 2025.
The People’s Bank of China (PBoC) decided to maintain its one-year Loan Prime Rate (LPR) at 3.45%. Additionally, the PBoC reduced the five-year LPR by 25 basis points from 4.20% to 3.95%.
Premier of the People’s Republic of China, Li Qiang, emphasized the importance of maintaining consistent and stable policies. The PBoC opted to keep its Medium-term Lending Facility (MLF) rate unchanged at 2.5%.
The Federal Reserve’s dot plot for this year indicates an expectation of 75 basis points in rate cuts, whereas the Fed funds futures market is pricing in approximately 89 basis points in cuts.
San Francisco Federal Reserve President Mary C. Daly addressed the Annual National Association for Business Economics (NABE) Policy Conference, where she mentioned that three rate cuts are a reasonable baseline for 2024. Daly emphasized that it’s premature to consider allowing the economy to run without intervention.
St. Louis Federal Reserve (Fed) president, James Bullard suggested at the NABE conference that the Federal Reserve should consider lowering interest rates at its March meeting to avoid dampening economic activity due to higher rates.
The preliminary Michigan Consumer Sentiment Index improved to 79.6 from 79.0 prior, lower than the expected reading of 80.0.
The US Core Producer Price Index (YoY) improved by 2% in January, surpassing the expected 1.6% and 1.7% prior. The MoM data showed a rise of 0.5%, against the expected 0.1% improvement from the previous decline of 0.1%.
US Producer Price Index came in at 0.9% year-over-year compared to the anticipated 0.6% and previous growth of 1.0%. Meanwhile, monthly improvement was 0.3% against the previous decline of 0.1%.
US Building Permits (MoM) contracted to 1.470 million in January, against the expected rise to 1.509 million from the previous 1.493 million.

Technical Analysis: Australian Dollar trades above the support at nine-day EMA near 0.6530

The Australian Dollar trades near 0.6530 on Tuesday, positioned above the immediate support around the nine-day Exponential Moving Average (EMA) at 0.6523 followed by the psychological support level of 0.6500. On the upside, the AUD/USD pair could find the key resistance zone around the 23.6% Fibonacci retracement at 0.6543 and the major level of 0.6550. A breakthrough above this zone could lead the AUD/USD pair to approach the psychological barrier of 0.6600 before the 38.2% Fibonacci retracement level of 0.6606.

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 Swiss Franc.

 
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF

USD
 
0.04%
-0.01%
0.04%
0.01%
0.03%
0.04%
-0.02%

EUR
-0.05%
 
-0.05%
0.00%
-0.04%
-0.01%
-0.01%
-0.07%

GBP
0.01%
0.05%
 
0.05%
0.01%
0.04%
0.04%
-0.02%

CAD
-0.04%
0.00%
-0.03%
 
-0.03%
-0.01%
-0.01%
-0.06%

AUD
0.00%
0.04%
-0.02%
0.03%
 
0.03%
0.03%
-0.03%

JPY
-0.03%
0.03%
-0.04%
0.00%
-0.03%
 
0.00%
-0.06%

NZD
-0.04%
0.02%
-0.04%
0.01%
-0.02%
0.00%
 
-0.06%

CHF
0.03%
0.07%
0.01%
0.06%
0.02%
0.06%
0.06%
 

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).

Interest rates FAQs

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

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