- Australian Dollar extends losses amid a 25 bps interest rate hike by the RBA.
- Australia’s central bank lifted OCR from 4.10% to 4.35% after holding interest rate for four consecutive meetings.
- China’s Trade Balance reduced to $56.53B against the market consensus of $81.95B in October.
The Australian Dollar (AUD) continues to decline despite a 25 basis points interest rate hike by the Reserve Bank of Australia (RBA) on Tuesday. The AUD/USD pair also faced losses as a result of the positive performance of US Treasury yields, aiding the US Dollar (USD) in bouncing back from its two-month low.
Australia’s central bank has recommenced policy tightening, raising the Official Cash Rate (OCR) from 4.10% to 4.35% after keeping the benchmark interest rate steady for four consecutive meetings. The RBA’s decision to take this step could be a reaction to the recent Consumer Price Index (CPI) data, which showed a third-quarter increase surpassing market consensus. Additionally, Australia’s seasonally adjusted Retail Sales (MoM) for September exceeded expectations.
Investors likely pay close attention to RBA Governor Michele Bullock’s commitment to the recent hawkish stance, indicating possible interest rate hikes down the road. Furthermore, major Australian banks such as ANZ, CBA, Westpac, and NAB have revised their forecasts for an RBA rate hike in response to resurging inflation and the hawkish statements from RBA policymakers.
China’s Trade Balance data for October revealed a decrease in the surplus balance against the market expectations of an improvement. While Exports (YoY) experienced a more significant decline, surpassing the expected decrease and exceeding the previous decline.
US Dollar Index (DXY) recovers from its seven-week low due to improved US Treasury yields. The 10-year US Treasury yield has bounced back from the six-week low noted last Friday. Moreover, Minneapolis Federal Reserve Bank President Neel Kashkari, in a Monday interview with the Wall Street Journal, conveyed a cautious approach to monetary policy.
President Kashkari leans towards being overly cautious, expressing a preference for overtightening rather than risking not doing enough to bring inflation in line with the central bank’s 2% target.
Daily Digest Market Movers: Australian Dollar faces challenges despite the interest rate hike by RBA
- RBA has resumed policy tightening, raising the Official Cash Rate (OCR) from 4.10% to 4.35% after maintaining the benchmark interest rate unchanged for four consecutive meetings.
- Australia’s TD Securities Inflation (YoY) reduced to 5.1% in September from 5.7% prior.
- Australia’s Retail Sales improved to 0.2% in the third quarter from the previous reading of -0.6%.
- Aussie Trade Balance (Month-on-Month) decreased to 6,786M in September, falling short of expectations set at 9,400M and down from the previous figure of 10,161M.
- In the twelve months leading up to September 2023, Australia’s monthly Consumer Price Index (CPI) recorded a 5.6% increase. However, the quarterly inflation rate dipped to 5.4% year-on-year in Q3.
- China’s Trade Balance data for October revealed a decrease in the surplus balance at $56.53B against the market expectations of an improvement to $81.95B from the previous readings of $77.71B. While Exports (YoY) experienced a more significant decline of 6.4%, more than the expected decline of 3.1%.
- US Bureau of Labor Statistics recently unveiled the Non-Farm Payrolls (NFP) data for October, disclosing a figure of 150K. This missed the expected 180K and marked a substantial drop from September’s 297K.
- US Average Hourly Earnings (Month-on-Month) saw a decline to 0.2%, deviating from the anticipated 0.3%. On a year-over-year basis, it came in at 4.1%, surpassing the 4.0% expectations.
- US ISM Services Purchasing Managers’ Index (PMI) declined from the previous 53.6 to 51.8. Additionally, on Thursday, the US Department of Labor released the count of initial claims for unemployment benefits for the week ending October 27, showing an increase from 212,000 to 217,000.
Technical Analysis: Australian Dollar breaks below the major support at 0.6450 level
The Australian Dollar trades lower around the major support at the 0.6450 level followed by the 14-day Exponential Moving Average (EMA) at 0.6406 lined up with the psychological level at 0.6400. On the upside, the 38.2% Fibonacci retracement level at 0.6508 could act as the immediate resistance followed by September’s high at 0.6521.
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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.21% | 0.22% | 0.26% | 0.87% | 0.29% | 0.62% | 0.17% | |
| EUR | -0.20% | 0.02% | 0.06% | 0.65% | 0.10% | 0.45% | -0.01% | |
| GBP | -0.22% | -0.02% | 0.04% | 0.65% | 0.08% | 0.43% | -0.03% | |
| CAD | -0.26% | -0.06% | -0.05% | 0.62% | 0.03% | 0.39% | -0.07% | |
| AUD | -0.88% | -0.67% | -0.66% | -0.61% | -0.58% | -0.22% | -0.68% | |
| JPY | -0.31% | -0.10% | -0.09% | -0.07% | 0.54% | 0.39% | -0.12% | |
| NZD | -0.66% | -0.46% | -0.44% | -0.40% | 0.22% | -0.36% | -0.47% | |
| CHF | -0.20% | 0.02% | 0.04% | 0.09% | 0.71% | 0.12% | 0.47% |
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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