- Australian Dollar retraces its losses on risk-on sentiment.
- Australian job advertisements improved by 0.1% in December from the 4.6% prior.
- PBoC former director Sheng Songchen stated that China’s property downturn might persist for another two years.
- US Dollar remains steady despite downbeat US bond yields.
The Australian Dollar (AUD) attempts to recover its losses on Monday after a decline in the previous two sessions. The Australian Dollar gains ground on a softer US Dollar (USD) amid subdued US Treasury yields. The market is anticipated to be relatively quiet regarding US economic data due to the observance of Martin Luther King Jr. Day on Monday.
Australia’s currency experienced upward support due to heightened market speculation about potential rate cuts by the US Federal Reserve (Fed) in March. This speculation gained momentum, especially after Barclays revised its forecast on Friday for the first Federal Reserve (Fed) rate cut, moving it up to March from June. In a note released on Friday, Barclays analysts expressed their expectation for the Federal Open Market Committee (FOMC) to reduce the Fed Funds rate by 25 basis points at the March meeting.
Australia’s job advertisements released by the Australia and New Zealand Banking Group Limited (ANZ) showed an improvement of 0.1% in December, swinging from the previous decline of 4.6%. Market participants are expected to closely observe the Westpac Consumer Confidence for January and the TD Securities Inflation for December, both scheduled for release on Tuesday. The focus will be shifted toward Consumer Inflation Expectations and labor market data on Thursday.
The People’s Bank of China’s (PBoC) former director Sheng Songchen stated at a forum in Shanghai on Saturday that the property downturn in China might persist for an additional two years before stabilizing, according to Bloomberg. He anticipates that new-home sales nationwide will likely decrease by another 50 million square meters in 2024 and 2025. The annual total for 2025 is expected to plateau around 850 million square meters.
The US Dollar Index (DXY) continues to gain ground for the third successive session. However, the softer Producer Price Index (PPI) data from the United States (US) on Friday might have contributed downward for the US Dollar. US Retail Sales data will be eyed on Wednesday.
Daily Digest Market Movers: Australian Dollar experiences gains on a risk-on mood
- Australia’s trade surplus increased to 11,437M MoM in December, surpassing the market expectation of 7,500M and exceeding the previous reading of 7,129M.
- Australian Monthly Consumer Price Index (YoY) for November showed a slight reduction to 4.3%, falling slightly short of the market expectation of 4.4% from the previous figure of 4.9%.
- Chinese Consumer Price Index (YoY) decreased by 0.3% in December, against the expected 0.4% decline. The monthly Consumer Price Index eased at 0.1%, compared to the market expectation of 0.2%. The yearly Producer Price Index fell by 2.7%, slightly exceeding the expected decline of 2.6%.
- Chinese Trade Balance in USD increased to $75.34B from the previous $68.39B, surpassing the expected $74.75B. The Exports (YoY) figure grew by 2.3%, exceeding the market consensus of 1.7%. The yearly Imports in CNY increased by 1.6%, compared to the previous 0.6%.
- US Bureau of Labor Statistics reported that the December Producer Price Index (PPI) figure was 1.0% year-on-year, compared to the previous reading of 0.8%. The Core PPI YoY arrived at 1.8%, down from 2.0% in November. Monthly, the headline and Core PPI indices remained flat at -0.1% and 0.0%, respectively.
- US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) surged to 3.4% YoY in December, exceeding both November’s 3.1% and the anticipated market figure of 3.2%. The monthly CPI growth for December showed a 0.3% increase, surpassing the market analysts’ estimated projection of 0.2%. The annual Core CPI stood at 3.9%, a slight decrease from November’s 4.0%, while the monthly figure remained steady at 0.3%, in line with expectations.
Technical Analysis: Australian Dollar consolidates near 0.6700 psychological level
The Australian Dollar trades near 0.6690 on Monday, positioned below the psychological barrier at 0.6700 followed by the 14-day Exponential Moving Average (EMA) at 0.6721. A potential breakthrough above the EMA might propel the AUD/USD pair toward the key resistance at 0.6750. On the downside, crucial support lies at 0.6650, in conjunction with the 38.2% Fibonacci retracement level, situated at 0.6637.
AUD/USD: Daily Chart
Australian Dollar price in the last 7 days
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies in the last 7 days. Australian Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.07% | -0.16% | 0.34% | 0.44% | 0.23% | 0.32% | 0.32% | |
| EUR | 0.09% | -0.09% | 0.41% | 0.52% | 0.32% | 0.40% | 0.39% | |
| GBP | 0.16% | 0.09% | 0.50% | 0.59% | 0.41% | 0.49% | 0.48% | |
| CAD | -0.33% | -0.41% | -0.49% | 0.10% | -0.08% | -0.01% | -0.01% | |
| AUD | -0.44% | -0.51% | -0.59% | -0.10% | -0.16% | -0.11% | -0.11% | |
| JPY | -0.26% | -0.33% | -0.43% | 0.11% | 0.22% | 0.08% | 0.06% | |
| NZD | -0.32% | -0.42% | -0.49% | 0.01% | 0.11% | -0.07% | -0.01% | |
| CHF | -0.30% | -0.39% | -0.48% | 0.02% | 0.13% | -0.08% | 0.01% |
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
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%.
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.
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.
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.
