- The Australian Dollar gains ground due to expectations that the RBA might lag in the global rate-cutting cycle.
- Australia’s 10-year government bond yield rises to near 4.4% as foreign investors seek protection from political uncertainties.
- Fed Chair Powell will deliver “The Semiannual Monetary Policy Report” to the US Congress on Tuesday.
The Australian Dollar (AUD) recovers its recent losses, trading near its six-month high of 0.6761 on Tuesday. This upside of the AUD is attributed to the rising expectations that the Reserve Bank of Australia (RBA) might lag in the global rate-cutting cycle or raise interest rates again due to strong inflation data for May.
Australia’s 10-year government bond yield remained steady at around 4.4%, as high yields attract foreign capital from investors seeking protection from political uncertainties in the US and Europe. The RBA’s June Meeting Minutes highlighted policymakers’ emphasis on the need to stay vigilant regarding inflation risks. They noted that a significant rise in prices could necessitate substantially higher interest rates.
The AUD/USD pair gains ground as the US Dollar (USD) struggles due to soft US employment data, leading traders to speculate that the Federal Reserve (Fed) might reduce interest rates sooner rather than later. The CME’s FedWatch Tool indicates that rate markets price in a 76.2% probability of a rate cut in September, up from 65.5% just a week earlier.
Federal Reserve Chairman Jerome Powell may deliver “The Semiannual Monetary Policy Report” to the US Congress on Tuesday. Powell could provide a broad overview of the economy and monetary policy, with his prepared remarks being published ahead of his appearance on Capitol Hill.
Daily Digest Market Movers: Australian Dollar improves due to hawkish sentiment surrounding RBA
- Australia’s Westpac Consumer Confidence dropped by 1.1% in July, reversing the 1.7% increase seen in June. This marks the fifth decline in 2024, driven by ongoing worries about high inflation, elevated interest rates, and a sluggish economy.
- US Nonfarm Payrolls (NFP) increased by 206,000 in June, following a rise of 218,000 in May. This figure surpassed the market expectation of 190,000.
- The US Unemployment Rate edged up to 4.1% in June from 4.0% in May. Meanwhile, Average Hourly Earnings decreased to 3.9% year-over-year in June from the previous reading of 4.1%, aligning with market expectations.
- According to the Australian Bureau of Statistics on Thursday, Australia’s trade surplus for May was A$5,773 million ($3,868 million), lower than the expected A$6,678 million and down from the previous reading of A$6,548 million.
- Australia’s Retail Sales, a measure of the country’s consumer spending, increased by 0.6% MoM in May, up from the previous month’s 0.1% rise. This figure exceeded market expectations of a 0.2% increase.
- Federal Reserve Bank of Chicago President Austan Goolsbee stated on BBC Radio on Wednesday that bringing inflation back to 2% will take time and that more economic data are needed. However, on Tuesday, Fed Chair Jerome Powell said that the central bank is getting back on the disinflationary path, per Reuters.
Technical Analysis: Australian Dollar holds ground around 0.6750
The Australian Dollar trades around 0.6740 on Tuesday. The daily chart analysis shows that the AUD/USD pair consolidates within an ascending channel, indicating a bullish bias. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 level, confirming the bullish momentum.
The AUD/USD pair may test the upper boundary of the ascending channel around 0.6765. A breakthrough above this level could lead the pair to explore the region around the psychological level of 0.6800.
On the downside, the AUD/USD pair may navigate around the lower boundary of the ascending channel at 0.6665, with further support around the 50-day Exponential Moving Average (EMA) at 0.6642.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | 0.00% | 0.11% | -0.00% | -0.02% | 0.07% | 0.07% | |
| EUR | 0.05% | 0.04% | 0.19% | 0.04% | 0.03% | 0.12% | 0.12% | |
| GBP | -0.01% | -0.04% | 0.12% | -0.01% | 0.00% | 0.07% | 0.07% | |
| JPY | -0.11% | -0.19% | -0.12% | -0.13% | -0.15% | -0.07% | -0.07% | |
| CAD | 0.00% | -0.04% | 0.00% | 0.13% | -0.03% | 0.09% | 0.06% | |
| AUD | 0.02% | -0.03% | 0.00% | 0.15% | 0.03% | 0.07% | 0.06% | |
| NZD | -0.07% | -0.12% | -0.07% | 0.07% | -0.09% | -0.07% | -0.00% | |
| CHF | -0.07% | -0.12% | -0.07% | 0.07% | -0.06% | -0.06% | 0.00% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (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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