Australian Dollar remains depressed on risk-off mood amid Middle-East conflict

Share:

  • Australian Dollar continues to lose ground over escalating fears of the Israel-Gaza conflict.
  • Australia’s Unemployment Rate outperformed expectations, standing at 3.6%.
  • The PBoC left Loan Prime Rates (LPR) unchanged at 3.45% for the one-year and 4.20% for the five-year.
  • US Jobless Claims declined to 198K the lowest level since January.
  • Fed Chair Powell suggested that the central bank is not planning to raise rates in the short term.

The Australian Dollar (AUD) faces a third consecutive day of losses, likely influenced by a prevailing risk-off sentiment. However, the AUD/USD pair found some uplift from a weakened US Dollar (USD) following comments by Federal Reserve (Fed) Chairman Jerome Powell on Thursday. Powell’s indication that the central bank is not planning to raise rates in the short term provides support for the pair.

Australia’s employment landscape is undergoing some intriguing developments. In September, Employment Change declined more than expected, introducing an unexpected twist to the equation. On the bright side, the Unemployment Rate took a positive turn by falling more than anticipated, deviating from the expected trend.

The US Dollar Index (DXY) rebounds from the recent losses, and this could be attributed to the higher US Treasury yields, coupled with robust economic data from the United States (US).

United States (US) job data showed the economy remains solid. The weekly Initial Jobless Claims have dropped to their lowest level since January, signaling a solid and resilient job market. On the other hand, existing home sales have fallen to their lowest point since 2010, suggesting challenges in the housing market.

The decline in existing home sales is particularly noteworthy, pointing to the negative impact of higher mortgage costs on housing market confidence.

Daily Digest Market Movers: Australian Dollar extends losses on stronger US employment data

  • Australia’s Unemployment Rate for September surprised on the positive side, coming in at 3.6%. This outperformed expectations of 3.7% and matched the previous figure of 3.7%.
  • Australian Employment Change for the same month was 6.7K, falling short of the consensus forecast of 20K. This is a notable decline from the 64.9K jobs added in August.
  • Australia’s central bank expresses heightened concern about the inflation impact stemming from supply shocks. Governor of the Reserve Bank of Australia, Michele Bullock stated that if inflation persists above projections, the RBA will take responsive policy measures. There is an observable deceleration in demand, and per capita consumption is on the decline.
  • The People´s Bank of China (PBoC) left Loan Prime Rates (LPR) unchanged at 3.45% for the one-year and 4.20% for the five-year. Furthermore, China’s Retail Sales (YoY) demonstrated a rise of 5.5%, surpassing both the previous figure of 4.6% and the expected 4.9%.
  • The situation in Israel, with preparations for a potential ground invasion of Gaza, is likely adding a layer of uncertainty for traders of the AUD/USD pair. The fact that US President Joe Biden is scheduled to address the nation on Thursday suggests the significance of the matter on the global stage.
  • Federal Reserve Chair Jerome Powell clarified that additional tightening of monetary policy might be justified if there’s substantial evidence of growth surpassing the norm or if the labor market ceases to improve.
  • Powell underscored that the primary concern remains inflationary risks. However, the policymaker indicated that the central bank is not planning to raise rates in the short term providing support for the AUD/USD pair.
  • US weekly Initial Jobless Claims declined to 198K, falling short of the market expectations of 212K for the week ending October 14, the lowest level since January.
  • Existing Home Sales Change fell 2.0% MoM in September and Existing Home Sales improved to 3.96M.
  • US Unemployment Rate improved to 3.6%, which was expected to remain consistent at 3.7% in September.  
  • Building Permits for September came in at 1.475 million, surpassing the expected 1.45 million. On the other hand, Housing Starts rebounded to 1.35 million, just shy of the market consensus of 1.38 million.
  • The US Bureau of Economic Analysis (BEA) disclosed that Retail Sales exceeded expectations of 0.3% MoM, which increased to 0.7% in September. While Retail Sales Control Group rose by 0.6% compared to the previous hike of 0.2%.
  • This robust performance underscores the resilience of consumers. Subsequently, the Federal Reserve reported that Industrial Production showed improvement by 0.3%, which was expected to remain at 0.0%.
  • Market fluctuations persist in the US bond market, as the 10-year Treasury yield stabilizes around 4.99%, marking its highest point since 2007. Meanwhile, the 2-year yield has dipped to 5.16%.
  • No major reports are on the horizon in the US. Federal Reserve officials Logan, Mester, and Harker are set to address the public, but their speeches are unlikely to spring any surprises.

Technical Analysis: Australian Dollar hovers above 0.6300 major level after remarks by Fed’s Powell

The Australian Dollar is currently trading lower around 0.6320 on Friday, in alignment with significant support at the 0.6300 level. The immediate support is marked by the monthly low at 0.6285. On the upside, a critical resistance is identified around the 14-day Exponential Moving Average (EMA) at 0.6354, followed by the major level of 0.6400. A breakthrough above this level has the potential to reach around the 23.6% Fibonacci retracement level at 0.6429.

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 Canadian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.09% 0.01% -0.04% 0.06% 0.01% 0.13% 0.04%
EUR -0.09%   -0.09% -0.13% -0.03% -0.06% 0.04% -0.04%
GBP 0.01% 0.10%   -0.03% 0.07% 0.03% 0.14% 0.07%
CAD 0.04% 0.13% 0.02%   0.14% 0.07% 0.18% 0.10%
AUD -0.08% 0.02% -0.07% -0.11%   -0.04% 0.05% -0.01%
JPY -0.02% 0.07% -0.03% -0.09% 0.05%   0.10% 0.03%
NZD -0.15% -0.05% -0.14% -0.17% -0.07% -0.09%   -0.08%
CHF -0.05% 0.03% -0.07% -0.10% 0.01% -0.03% 0.08%  

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.

Source: https://www.fxstreet.com/news/australian-dollar-extends-losses-on-a-third-day-after-stronger-us-data-202310200113

Source: https://webfulnet.com/

Accessibility Dashboard

Accessibility settings have been reset

Help = available voice commands

Hide help = available voice commands

Scroll down = available voice commands

Scroll up = available voice commands

Go to top = available voice commands

Go to bottom = available voice commands

Tab = available voice commands

Tab back = available voice commands

Show numbers = available voice commands

Hide numbers = available voice commands

Clear input = available voice commands

Enter = available voice commands

Reload = available voice commands

Stop = available voice commands

Exit = available voice commands