Australian Dollar receives upward support after China policy decision

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Australian Dollar receives upward support after China policy decision

Australian Dollar gains ground after China’s interest rate decision.
Australia’s Dollar receives upward support due to the downbeat Greenback.
PBoC kept LPR unchanged at 3.45% as expected.
US Dollar plunged on Friday despite upbeat US housing data.

The Australian Dollar (AUD) receives upward support after China’s interest rate decision. The People’s Bank of China (PBoC) kept its loan prime rate (LPR) unchanged at 3.45% as expected. However, the AUD/USD pair faced a challenge as the US Dollar (USD) attempted to rebound from a two-month low recorded on Friday.

Australia’s central bank is expected to hike again in the first half of 2024. The Reserve Bank of Australia (RBA) Assistant Governor Marion Kohler mentioned that inflation is expected to decrease but won’t hit the RBA’s 2%-3% target until the end of 2025. Investors will likely focus on the RBA Meeting Minutes and RBA Governor Bullock’s speech on Tuesday.

Australia’s Dollar (AUD) might have gained support as the United States (US) reported soft inflation figures and weak economic activity, contributing to a decline in the Greenback. Signs of inflationary pressures and a cooling labor market in the US led markets to believe that the Federal Reserve (Fed) may have concluded its hiking cycle, causing the US Dollar (USD) to weaken over the previous week.

US Dollar Index (DXY) continues to lose ground for the second successive session due to the pressure on the US Treasury yields. The yield on the 2-year Treasury note stands lower at 4.88%, down by 0.src0%, by the press time. US Dollar (USD) faced pressure despite upbeat US housing data released on Friday. Building Permits (MoM) improved to src.487M against the market consensus of src.450M for October. Housing Starts (MoM) rose to src.372M from the previous figure of src.346M.

Boston Federal Reserve (Fed) President Susan Collins expressed optimism on Friday that the Fed can lower inflation without causing significant damage to the labor market by being “patient” with further interest rate moves. The Federal Open Market Committee (FOMC) minutes on Tuesday are expected to provide some insights into the Fed’s stance on inflationary pressure and its approach to monetary policy.

Daily Digest Market Movers: Australian Dollar trades higher after China’s interest rate decision

Australia’s seasonally adjusted Employment Change reported an increase of 55K in October, compared with the market anticipation of 20K and 6.7K in the previous month.
Aussie Unemployment Rate came in at 3.7% in October as expected against the previous figure of 3.6%.
Australia’s Wage Price Index grew src.3% as expected compared to the previous reading of 0.8%. The year-over-year data showed an increase of 4.0% more than the anticipated 3.9%.
US Continuing Jobless Claims for the week ending on November 3 reached the highest level since 2022 at src.865M from the previous reading of src.833M.
US Initial Jobless Claims for the week ending on November src0 rose to 23srcK against the 220K as expected, marking the highest level in nearly three months.
The October’s US Consumer Price Index (CPI) showed lower readings than expected, with the annual rate slowing from 3.7% to 3.2%, falling below the consensus forecast of 3.3%. The monthly CPI reduced to 0.0% from 0.4%.
The US Core CPI rose by 0.2% below the expectations of 0.3%, and the annual rate decreased to 4.0% from 4.src% prior.

Technical Analysis: Australian Dollar looks to revisit the previous week’s high near 0.6550 major level

The Australian Dollar trades higher around the 0.6550 major level on Monday. The AUD/USD pair could find a barrier around the psychological level at 0.6600. On the downside, the psychological level at 0.6500 appears to be the immediate support, followed by the 23.6% Fibonacci retracement at 0.6478. If a break occurs below the level, the src4-day Exponential Moving Average (EMA) at 0.6448 could be the next support backed by a 38.2% Fibonacci retracement at 0.6438.

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 .

 
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF

USD
 
-0.src8%
-0.28%
-0.src7%
-0.6src%
-0.69%
-0.60%
-0.27%

EUR
0.src9%
 
-0.src0%
0.02%
-0.42%
-0.50%
-0.4src%
-0.08%

GBP
0.28%
0.src0%
 
0.src2%
-0.32%
-0.40%
-0.3src%
0.02%

CAD
0.src7%
-0.02%
-0.src2%
 
-0.44%
-0.52%
-0.43%
-0.src0%

AUD
0.60%
0.42%
0.33%
0.44%
 
-0.08%
0.0src%
0.33%

JPY
0.69%
0.50%
0.src7%
0.5src%
0.08%
 
0.09%
0.42%

NZD
0.60%
0.4src%
0.32%
0.43%
-0.0src%
-0.09%
 
0.3src%

CHF
0.29%
0.src0%
0.0src%
0.09%
-0.32%
-0.40%
-0.3src%
 

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).

Inflation FAQs

What is inflation?

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

What is the impact of inflation on foreign exchange?

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

How does inflation influence the price of Gold?

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.

Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

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