- Australian Dollar could face challenges as the RBA is expected to maintain its current rates.
- Australia’s S&P/ASX 200 Index tracks softer commodity prices.
- Chinese Retail Sales (YoY) increased by 5.5% in February, against the expected 5.2% and 7.4% prior.
- US Dollar retraces gains on weaker US Treasury yields.
The Australian Dollar (AUD) snaps its losing streak on Monday. The AUD/USD pair receives upward support as the US Dollar (USD) retraces its gains on lower US Treasury yields. However, market participants adopt caution ahead of the Reserve Bank of Australia’s (RBA) policy decision scheduled for Tuesday. Additionally, investors are awaiting interest rate decisions from both the People’s Bank of China (PBoC) and the US Federal Reserve (Fed), expected to be released on Wednesday.
Australian Dollar could have faced pressure as the S&P/ASX 200 Index extends its decline for the third consecutive session. Mining and energy stocks are leading the downturn, reflecting softer commodity prices. Meanwhile, severe Tropical Cyclone Megan is expected to bring destructive winds and heavy rainfall to Australia’s far north. Evacuations are underway, and a major manganese mine has been closed in anticipation of the cyclone’s arrival.
The US Dollar Index (DXY) loses ground amidst the market confusion surrounding the Federal Reserve, which is expected to maintain its higher interest rates in response to recent inflation pressure. Traders will likely observe the housing data from the United States (US) on Tuesday.
Daily Digest Market Movers: Australian Dollar appreciates amid a market risk aversion
- According to Bloomberg, Westpac anticipates the Reserve Bank of Australia could maintain its cash rate at 4.35% at Tuesday’s meeting.
- RBA Governor Michele Bullock recently stated that inflation in Australia is primarily “homegrown” and “demand-driven,” attributable to the strength of the labor market and increasing wage inflation. The RBA does not anticipate this phenomenon occurring until 2026.
- China’s Retail Sales (YoY) increased by 5.5% in February, against the expected 5.2% and 7.4% prior.
- Chinese Industrial Production (YoY) rose by 7.0%, compared to the market expectation of a 5.0% figure in February and 6.8% previous reading.
- According to the CME FedWatch Tool, the probability of a rate cut in March currently stands at 1.0%, while it has decreased to 6.1% for May. The likelihood of a rate cut in June and July is lower, at 56.3% and 75.2%, respectively.
- The preliminary US Michigan Consumer Sentiment Index for March decreased to 76.5, from the previous reading of 76.9. This decline comes in contrast to expectations of it remaining unchanged.
- The Board of Governors of the Federal Reserve released Industrial Production (MoM), which increased by 0.1% in February, against the expected reading of flat 0.0% and from the previous decline of 0.5%.
- The US Core Producer Price Index (PPI) remained consistent with the rise of 2.0% year-over-year in February, maintaining its position above the 1.9% expected. The monthly report showed an increase of 0.3% against 0.5% prior, exceeding the expected 0.2% reading.
- US PPI (YoY) increased by 1.6% in February, surpassing the expected 1.1% and 1.0% prior. PPI (MoM) rose by 0.6% above the market expectation and the previous increase of 0.3%.
- US Retail Sales rose by 0.6% monthly, below the expected 0.8% in February, swinging from the previous decline of 1.1%. While Retail Sales Control Group improved to a flat 0.0%, compared to the previous decline of 0.3%.
Technical Analysis: Australian Dollar hovers above the major support at 0.6550
The Australian Dollar is trading near 0.6560 on Monday. The AUD/USD pair could find immediate support around the 50.0% retracement level of 0.6555, coinciding with a significant support level of 0.6550. A breach below this level could potentially exert downward pressure on the pair, with further support expected around the 61.8% Fibonacci retracement level of 0.6528, followed by the psychological level of 0.6500. On the upside, the AUD/USD pair may face resistance near the nine-day Exponential Moving Average (EMA) at 0.6576, followed by the psychological barrier at 0.6600.
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 | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.09% | -0.04% | -0.08% | -0.15% | 0.05% | -0.20% | -0.05% | |
| EUR | 0.07% | 0.03% | -0.01% | -0.08% | 0.11% | -0.13% | 0.01% | |
| GBP | 0.04% | -0.04% | -0.04% | -0.11% | 0.08% | -0.16% | -0.02% | |
| CAD | 0.09% | 0.01% | 0.04% | -0.07% | 0.13% | -0.12% | 0.02% | |
| AUD | 0.15% | 0.07% | 0.11% | 0.07% | 0.19% | -0.05% | 0.09% | |
| JPY | -0.04% | -0.14% | -0.02% | -0.13% | -0.20% | -0.25% | -0.11% | |
| NZD | 0.20% | 0.12% | 0.16% | 0.12% | 0.06% | 0.24% | 0.12% | |
| CHF | 0.09% | 0.01% | 0.04% | 0.00% | -0.07% | 0.14% | -0.12% |
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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