- Australian Dollar continues to lose ground after the release of jobs figures by the Australian Bureau of Statistics.
- Australia’s Unemployment Rate outshone predictions at 3.6%, surpassing the expected 3.7%.
- Employment Change fell below the consensus forecast, reporting 6.7K instead of the anticipated 20K.
- US housing market is currently presenting a puzzle with conflicting signals, keeping observers on alert.
The Australian Dollar (AUD) continues its losses against the US Dollar (USD) on mixed employment data released by the Australian Bureau of Statistics on Thursday. The AUD/USD pair halted its two-day winning streak in the previous session amid a speech by Reserve Bank of Australia (RBA) Governor Michele Bullock.
Australia’s employment landscape seems to be experiencing a bit of a twist. In September, the Employment Change dropped more than anticipated, introducing an unexpected element to the equation. On the flip side, the Unemployment Rate took a more positive turn by falling more than expected, deviating from the anticipated consistency.
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). However, the plot thickens with the dovish remarks coming from several Federal Reserve officials, indicating a cautious stance by the central bank. There’s a prevailing sentiment of reluctance when it comes to tightening monetary policy in the current economic climate.
The US housing market seems to be keeping everyone on their toes with mixed signals. On one hand, the Building Permits in September came in better than expected, suggesting a positive scenario. Meanwhile, Housing Starts rebounded, albeit slightly below the market consensus, adding a layer of complexity to the narrative.
The Beige Book’s observation about economic activity showing “little to no change” during September and early October adds a broader perspective.
Daily Digest Market Movers: Australian Dollar extends losses after the release of 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 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.
- 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’s board members acknowledged in October’s meeting minutes 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.
- US Dollar is benefiting due to the conflict in the Gaza Strip. The situation is intensifying following a rocket attack on a hospital that resulted in the death of over 500 civilians. Accusations are flying between Israel and Hamas regarding the explosion at the building.
- China’s Gross Domestic Product surpassed expectations, showing a growth of 1.3% compared to the anticipated 1.0%. The annual report for the same quarter revealed an increase of 4.9%, exceeding the expected 4.4%.
- 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%.
- 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%.
- Richmond Fed President Thomas Barkin noted that current policy is already restrictive. Barkin expressed uncertainty about the upcoming FOMC monetary policy meeting in November. He emphasized that the US central bank cannot depend on longer-term higher bond yields alone to tighten monetary conditions.
- The higher US Treasury yields from recent losses could provide support to the US Dollar. The 10-year US Treasury bond yield stands at 4.92%, by the press time.
- Thursday seems set to bring a substantial dose of economic insights to the US. Existing Home Sales, the Philly Fed index, and the weekly Jobless Claims report are on the docket, promising a comprehensive look at different facets of the economy. If these indicators continue to signal a robust economy and a labor market that’s holding tight, it could very well keep the US Dollar in demand.
Technical Analysis: Australian Dollar moves below around 0.6300 major level on mixed Australian data
The Australian Dollar trades lower around the major support at 0.6300 level during the Asian session on Thursday. The monthly low at 0.6285 emerges as the immediate support. On the upside, a crucial resistance is observed at the 21-day Exponential Moving Average (EMA) around the 0.6371 level aligned with the major level of 0.6400. A break above the level could reach the region around the 23.6% Fibonacci retracement level at 0.6429. These technical indicators provide traders with insights into potential resistance zones that could influence the direction of the Aussie 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 weakest against the .
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).
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.