Australian Dollar depreciates after dovish comments from the RBA Deputy Governor Hauser
- The Australian Dollar loses ground as RBA Deputy Governor Hauser advises against formulating policy based on a single inflation report.
- Australia’s high inflation has fueled speculation that the RBA might raise interest rates again in August.
- The US Dollar appreciates due to higher yields ahead of Friday’s release of Core PCE inflation.
The Australian Dollar (AUD) depreciates against the US Dollar (USD) on Friday, which could be attributed to the dovish comments from the Reserve Bank of Australia’s (RBA) Deputy Governor Andrew Hauser. Hauser said it would be a “bad mistake” to formulate policy in response to a single inflation report. He emphasized that there is still a suite of economic data to come that will require detailed analysis, per Bloomberg.
The AUD gained ground after releasing May's higher-than-expected Monthly Consumer Price Index (CPI). The persistently high inflation has fueled speculation that the RBA might raise interest rates again in August.
The US Dollar (USD) gains ground due to higher yields on US Treasury bonds. Friday’s Core PCE Price Index inflation is projected to decrease YoY to 2.6% from the previous 2.8%. This data is seen as the Federal Reserve's (Fed) preferred inflation gauge.
Daily Digest Market Movers: Australian Dollar declines due to hawkish Fedspeak
- Australia’s 10-year government bond yield surged above 4.4%, reaching a three-week high, as a hot inflation reading fueled fears that the Reserve Bank of Australia might raise interest rates again in the next meeting in August.
- Federal Reserve (Fed) Board of Governors member Michelle Bowman noted on Thursday that she is still not ready to support a central bank rate cut with inflation pressures still elevated. Bowman said, adding “We are still not yet at the point where it is appropriate to lower the policy rate, and I continue to see a number of upside risks to inflation,” per Reuters.
- US Gross Domestic Product Annualized expanded by 1.4% in Q1, slightly higher than the previous reading of 1.3%, but continuing to point to the lowest growth since the contractions in the first half of 2022.
- US Initial Jobless Claims showed on Thursday that the number of people claiming unemployment benefits fell to 233,000 in the week ending June 21, below market expectations of 236,000. The claim count fell for a second consecutive week since hitting the 10-month high of 243,000 earlier in June.
- The first US presidential debate between President Joe Biden and Republican Presidential Nominee Donald Trump began on CNN News. Biden acknowledged that “inflation had driven prices substantially higher than at the start of his term but said he deserves credit for putting 'things back together again' following the coronavirus pandemic.” In response, Trump condemned elevated inflation levels. He suggested that tariffs would decrease deficits and urged scrutiny of countries like China, per Reuters.
- Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent stated on Wednesday that recent data emphasize the necessity of remaining vigilant about potential inflation increases. Kent noted that current policies are contributing to slower demand growth and lower inflation. He also mentioned that no options regarding future interest rate adjustments are being excluded, per Bloomberg.
- Australia’s monthly Consumer Price Index (CPI) jumped by 4.0% in the year to May, up from the 3.6% increase recorded in April, according to data published by the Australian Bureau of Statistics (ABS) on Wednesday. This increase exceeded the market forecast, which predicted a 3.8% growth for the reported period.
Technical Analysis: Australian Dollar falls below 0.6650
The Australian Dollar trades around 0.6630 on Friday. The daily chart analysis indicates a neutral bias for the AUD/USD pair as it consolidates within a rectangle formation. The 14-day Relative Strength Index (RSI) is at the 50 level, also suggesting neutral momentum. Further movement may signal a clear directional trend.
The AUD/USD pair finds support around the 50-day Exponential Moving Average (EMA) at 0.6618. A break below this level could lead the pair to test the lower boundary of the rectangle formation near 0.6585.
On the upside, the AUD/USD pair may face resistance near the upper boundary of the rectangle formation around 0.6695, close to the psychological level of 0.6700. Further resistance appears at 0.6714, the highest level since January.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.03% | 0.10% | 0.12% | 0.21% | 0.20% | 0.08% | |
| EUR | -0.10% | -0.06% | -0.03% | 0.02% | 0.09% | 0.10% | -0.02% | |
| GBP | -0.03% | 0.06% | 0.02% | 0.07% | 0.16% | 0.15% | 0.01% | |
| JPY | -0.10% | 0.03% | -0.02% | 0.02% | 0.12% | 0.10% | -0.01% | |
| CAD | -0.12% | -0.02% | -0.07% | -0.02% | 0.08% | 0.07% | -0.07% | |
| AUD | -0.21% | -0.09% | -0.16% | -0.12% | -0.08% | -0.01% | -0.14% | |
| NZD | -0.20% | -0.10% | -0.15% | -0.10% | -0.07% | 0.00% | -0.14% | |
| CHF | -0.08% | 0.02% | -0.01% | 0.00% | 0.07% | 0.14% | 0.14% |
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).
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 of 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 from 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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