- The Australian Dollar inches higher due to the improved Consumer Sentiment index released on Tuesday.
- Australia’s Westpac Consumer Confidence rose by 1.7% MoM in June, marking the highest level since February.
- The US Dollar may limit its downside; strong US business activity data dampened expectations for Fed rate cuts.
The Australian Dollar (AUD) inches higher due to an improvement in Australia’s Westpac Consumer Confidence Index, released on Tuesday. Additionally, the AUD/USD pair receives support from the hawkish stance of the Reserve Bank of Australia (RBA). However, investors are likely to be cautious ahead of this week’s Australian inflation data.
The RBA Governor Michele Bullock said during her latest press conference that the Board discussed potential rate hikes, dismissing considerations of rate cuts in the near term, as per ABC News. Markets have significantly reduced their expectations for a RBA’s rate cut this year, with an easing not anticipated until April next year.
The US Dollar trades on a softer note ahead of key US economic data due later this week. The revised US Gross Domestic Product (GDP) for the first quarter (Q1) is set to be released on Thursday, followed by the Personal Consumption Expenditure (PCE) Price Index on Friday.
Daily Digest Market Movers: Australian Dollar edges higher due to improved Consumer Sentiment
- According to Bloomberg, China Premier Li Qiang expressed confidence that China is capable of achieving its full-year growth target of around 5%. Qiang warned that decoupling and protectionism would only increase economic operational costs globally. Any change in the Chinese economy could impact the Australian market, as China and Australia are close trade partners.
- On Tuesday, the People’s Bank of China injected 300 billion Yuan via seven-day reverse repos, maintaining the reverse repo rate at 1.8%.
- Australia’s Westpac Consumer Confidence rose by 1.7% month-over-month in June, rebounding from a 0.3% decline the previous month. This marks the first increase in four months and the highest level since February.
- According to the CME FedWatch Tool, investors are pricing in nearly 67.7% odds of a Fed rate cut in September, compared to 61.5% a week earlier.
- On Friday, the US Composite PMI for June surpassed expectations, rising to 54.6 from May’s reading of 54.5. This figure marked the highest level since April 2022. The Manufacturing PMI increased to a reading of 51.7 from a 51.3 figure, exceeding the forecast of 51.0. Similarly, the Services PMI rose to 55.1 from 54.8 in May, beating the consensus estimate of 53.7.
- As per a Reuters report, Fed Reserve Bank of Minneapolis President Neel Kashkari noted on Thursday that it will probably take a year or two to get inflation back to 2%.
Technical Analysis: Australian Dollar hovers around 0.6650
The Australian Dollar trades around 0.6650 on Tuesday. Analysis of the daily chart shows a neutral bias for the AUD/USD pair as it consolidates within a rectangle formation. The 14-day Relative Strength Index (RSI) is positioned slightly above the 50 level, indicating a potential bullish bias.
The AUD/USD pair may find support around the 50-day Exponential Moving Average (EMA) at 0.6615, with additional support near 0.6585, marking the lower boundary of the rectangle formation.
On the upside, the AUD/USD pair may encounter resistance near the upper boundary of the rectangle formation around 0.6695, aligned with the psychological level of 0.6700. Beyond that, potential resistance levels include the high of 0.6714 observed 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 strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.07% | -0.11% | -0.10% | -0.13% | -0.19% | -0.06% | -0.17% | |
| EUR | 0.07% | -0.06% | -0.03% | -0.06% | -0.10% | 0.02% | -0.10% | |
| GBP | 0.11% | 0.04% | 0.01% | -0.02% | -0.05% | 0.05% | -0.06% | |
| CAD | 0.10% | 0.03% | -0.01% | -0.02% | -0.06% | 0.05% | -0.07% | |
| AUD | 0.14% | 0.06% | 0.02% | 0.02% | -0.03% | 0.07% | -0.02% | |
| JPY | 0.18% | 0.10% | 0.06% | 0.09% | 0.01% | 0.10% | -0.02% | |
| NZD | 0.06% | -0.01% | -0.05% | -0.04% | -0.07% | -0.11% | -0.12% | |
| CHF | 0.17% | 0.10% | 0.06% | 0.07% | 0.04% | -0.01% | 0.11% |
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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