- Australian Dollar continues to gain post-release of the RBA Meeting Minutes.
- RBA board members favored to maintain the current interest rates.
- Australia’s Consumer Confidence declined to 76.4 compared to the previous figure of 80.1.
- US Dollar faces challenges due to the dovish comments made by multiple Fed members.
- Fed member Patrick Harker expressed to maintain interest rates at their current levels.
The Australian Dollar (AUD) extends its gains on the second successive day, remaining firmer against the US Dollar on Tuesday. The pair receives upward support after the hawkish Reserve Bank of Australia (RBA) minutes for the October 2023 meeting were released on Tuesday.
Australia’s central bank was involved in the consideration of whether to raise interest rates by 25 basis points (bps) or to maintain the current rate. However, the board members concluded that the stronger case was to keep the rates steady. They made this judgment based on factors such as inflation data, employment figures, and updated forecasts, which would be available at the November meeting.
RBA’s board members acknowledged that there were significant concerns about upside risks to inflation. This suggests that the board is cautious about potential factors that could lead to an increase in inflation
The US Dollar Index (DXY) faces downward pressure, and this is attributed to the dovish comments made by multiple Federal Reserve officials indicating that no further interest rate hikes are anticipated for the remainder of 2023. The dovish stance suggests a cautious approach by the central bank, emphasizing a reluctance to tighten monetary policy in the current economic environment.
Federal Reserve Bank of Philadelphia President Patrick Harker added to this sentiment by stating on Monday that the central bank should avoid creating new pressures in the economy by increasing the cost of borrowing. Harker further expressed the view that in the absence of a significant shift in the data, the Fed should maintain interest rates at their current levels.
Daily Digest Market Movers: Australian Dollar continues to gain on hawkish RBA minutes
- Australian Weekly ANZ Roy Morgan Consumer Confidence survey, released on Tuesday, indicates a decline in the nation’s Consumer Confidence. The reading fell to 76.4 compared to the previous figure of 80.1. The decline is observed across all sub-indices, reflecting a more cautious or negative sentiment among consumers.
- RBA could introduce a central bank digital currency (CBDC). Brad Jones, Assistant Governor (Financial System) at the RBA, discussed the tokenization of assets and money in the digital era at The Australian Financial Review Cryptocurrency Summit.
- Australian Consumer Inflation Expectations for October were reported at 4.8% on Thursday, reflecting a slight increase from the September figure of 4.6%. The rebound in inflation observed in August, primarily influenced by elevated oil prices, raises the likelihood of another interest rate hike by the RBA.
- The National Bureau of Statistics of China reported on Friday that Chinese inflation experienced a decrease in September. This development could exert pressure on the Australian Dollar (AUD). The Chinese data indicates ongoing economic challenges despite the recent government stimulus plan aimed at supporting the nation in achieving its 5% growth target.
- The ongoing conflict in the Middle East introduces an additional layer of complexity to the situation. This geopolitical factor could potentially prompt the RBA to implement a 25 basis points (bps) interest rate hike, reaching 4.35% by the end of the year.
- Investors appear to be exercising caution in making aggressive bets on the US Dollar (USD), given the uncertainty surrounding the Fed policy rate trajectory. The lack of a clear direction from the Fed on interest rates is influencing market sentiment and contributing to hesitancy among investors.
- The recovery in US Treasury yields from recent losses is seen as a potential factor that could provide support to the US Dollar. The 10-year US Treasury bond yield stands at 4.72%, by the press time.
- Additionally, the USD continues to benefit from safe-haven flows amid rising geopolitical tensions between Israel and Palestine. Safe-haven currencies, including the US Dollar, tend to attract demand during periods of heightened uncertainty and geopolitical risks.
- According to an undisclosed source to Reuters, US officials and Israel have engaged in discussions about the possibility of a visit by US President Joe Biden to Israel. The invitation for the visit reportedly came from Israeli Prime Minister Benjamin Netanyahu.
- Market participants will likely monitor the US Retail Sales and the Fed Beige Book report will also be eyed on Tuesday. The Australian employment data will be released on Thursday. Traders will take cues from these figures and find the trading opportunities around the AUD/USD pair.
Technical Analysis: Australian Dollar hovers around the psychological level at 0.6350 level
The Australian Dollar trades higher around the major level of 0.6350 during the Asian session on Tuesday. The 0.6300 emerges as the significant support level, which aligns with the monthly low at 0.6285. On the upside, a crucial resistance is observed at the major level of 0.6400. This level coincides with the 23.6% Fibonacci retracement level at 0.6429 and is lined up with the 50-day Exponential Moving Average (EMA) around the 0.6436 level. These technical indicators provide traders with insights into potential resistance zones that could influence the direction of the Australian Dollar.
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 Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.11% | 0.18% | 0.07% | -0.22% | 0.02% | 0.06% | 0.12% | |
| EUR | -0.11% | 0.04% | -0.01% | -0.32% | -0.09% | -0.04% | 0.01% | |
| GBP | -0.15% | -0.04% | -0.08% | -0.37% | -0.13% | -0.09% | -0.08% | |
| CAD | -0.09% | 0.03% | 0.11% | -0.28% | -0.05% | 0.00% | 0.03% | |
| AUD | 0.22% | 0.31% | 0.36% | 0.30% | 0.23% | 0.26% | 0.32% | |
| JPY | -0.02% | 0.09% | 0.15% | 0.05% | -0.22% | 0.03% | 0.10% | |
| NZD | -0.05% | 0.06% | 0.13% | 0.02% | -0.26% | -0.03% | 0.06% | |
| CHF | -0.12% | -0.01% | 0.03% | -0.03% | -0.33% | -0.11% | -0.06% |
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).
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
